Macroeconomics 5th Edition by Olivier Blanchard

Exercise 1

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly
a. The current U.S. trade deficit is the result of unusually high investment, not the result of a decline in national saving.
b. The national income identity implies that budget deficits cause trade deficits.
c. Opening the economy to trade tends to increase the multiplier because an increase in expenditure leads to more exports.
d. If the trade deficit is equal to zero, then the domestic demand for goods and the demand for domestic goods are equal.
e. A real depreciation leads to an immediate improvement in the trade balance.
f. A small open economy can reduce its trade deficit through fiscal contraction at a smaller cost in output than can a large open economy.
g. The current high U.S. trade deficit is solely the result of a real appreciation of U.S. goods between 1995 and 2002.