National and International Economies
Question 1: Which sector (household, business, or international) spends the most? Which sector spends the least? Which sector spends the least? Which sector, because of volatility, has importance greater than is warranted by its size?
Question 2. Why does the value of output always equal the income received by the resources that produced the output?
Question 3. People sometimes argue that imports should be limited by government policy. Suppose a government quota on the quantity on imports causes net exports to rise. Using the circular flow diagram as a guide, explain why total expenditures and national output may rise after the quota is imposed. Who is likely to benefit from the quota? Who will be hurt?
Question 4. Suppose there are three countries in the world. Country A exports $11 million worth of goods to country B and $5 million worth of goods to country C; country B exports $3 million worth of goods to country A and $6 million worth of goods to country C; and country C exports $4 million worth of goods to country A and $1 million worth of goods to country B.
a. What are the net exports of countries A, B, and C?
b. Which country is running a trade deficit? A trade surplus?