Trade deficit and protectionism
1 What are the arguments in favor of trade restrictions,
and what are the counterarguments? According to most economists, do any of
these arguments really justify trade restrictions? Explain
2 State what, if anything, each of the following does to
the supply or demand of loanable funds
a net capital outflow increases at each interest rate
b domestic investment increases at each interest rate
c the government deficit increases
d private saving increases
3 What effect do protectionist policies have on the trade
deficit?
4 Explain why policy lags could make stabilization policies
counterproductive
5 Describe three costs of inflation