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Current Account Deficit (CAD):
Boon or Bane The general belief is that high CADs are dangerous. In general, this is correct. But the converse that low CADs are good is not. As seen above, a CAD is nothing but a measure of a country's savings gap, i.e., the excess of investment over savings. It represents the net transfer of resources from the rest of the world to the country running the deficit. Therefore, in a developing country, with a huge needs for funds for investment, a CAD makes sense. It allows it to finance investments that would have been well beyond what it could hope to finance with its own savings. On the flip side, CADs are to be financed by foreign capital inflows. The capital flows are fickle, can be reversed, and have to be serviced. The right CAD for any country, therefore, depends on its ability to absorb and service capital inflows. If these resources can be deployed productively and in ways that enhance its ability to repay, a high CAD to GDP ratio is nothing to worry about. But if they cannot, then it is inviting trouble. Too high a ratio canprove unsustainable in the long run as it did in East Asian economies in 1998and in Mexico earlier.
To that extent low ratio has its advantages. But, very low ratio carries with it an opportunity cost?of not being able tobenefit from resources that could be drawn from outside.
Manpower-Population Ratios In this technique, manpower will not be planned for the economy as a whole. It will be planned for sectors or sub-sectors of an economy. For instanc
Private and Social Benefits Private benefits are those which accrue to an individual. They may be both monetary and non monetary, direct and indirect. Earnings of an individua
the basic circular flow model suggests that...
REAL BUSINESS CYCLE THEORY: The parable that motivates this discussion originated with Edmund Phelps and invites you to think that all men (and women) are islands. They have p
What is opportunity cost? Answer: Opportunity cost is a term used in economics, to mean the cost of something in terms of an opportunity foregone (and the advantages that co
Please write an essay (2-2.5 pages) based on this paper You">http://www.nobelprize.org/nobel_prizes/economics/laureates/2001/akerlof-lecture.pdf You pick one over 6 macroeconomic
What is the theory of second best
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Severe drought hit the coffee industry hard this year; as a result, more people are now switching to tea. The first table below shows the original supply and demand quantities in t
1. Why does inflation make nominal GDP a poor measure of the increase in total production from one to the next? How does the U.S' BEA deal with the problem inflation causes w
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