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Q. Using an equation, explain why governments prefer to avoid excessive current account surpluses.
Answer: This pursue from the national income identity S = CA + I which says that total domestic savings S is divided among foreign asset accumulation CA and domestic investment I.
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Q. Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run
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