Figure 19.2: Foreign Assets in the U.S

question 96

Essay

Figure 19.2: Foreign Assets in the U.S.
-Consider the figure above, which shows net exports (BOPCAA), the federal government's budget deficit (FYFSD), and net capital outflows (-BOPIA). Explain how these are related. Between 2008 and 2010, the budget deficit grew from about -$200 billion to over -$1.4 trillion (not shown). What impact will this have on the net exports?

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Definitions:

Artificially Scarce Good

A product or service whose availability is restricted through patents, copyrights, or other legal means, rather than by the limits of physical scarcity.

Pigouvian Tax

A tax imposed on activities that generate negative externalities, intended to correct an inefficient market outcome by internalizing the external costs.

Efficient Level

A point at which resources are allocated in the most effective manner, maximizing output without wasting resources.

Excludable

A characteristic of a good or service that allows its owner to prevent others from using it without permission.