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Essay / Research Paper Abstract
A 4 page paper answering several questions along the lines of “Consider a poor, underdeveloped country. Would you expect such a country to maintain a trade surplus or a trade deficit? Why?” The unnamed country undertakes a quick but successful war, and many of the questions refer to that scenario in terms of government spending and the effects of various means (tax surcharge, war bonds, tax cuts) of paying for the war and its effects on the larger economy and world interest rates. Bibliography lists 2 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSeconWar.rtf
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Unformatted sample text from the term paper:
is more likely to maintain a trade surplus than to carry a trade deficit, for several reasons. The most obvious of these reasons is that if the people of
the country are very poor, then they have little if any discretionary income with which to purchase imported items. Some governments of poor countries can have much more extensive
financial resources while the citizenry lives on a subsistence level, but without a strong economic base, not even the government can generate a significant trade deficit.
Without some means of building a strong economy, this nation is likely to remain poor. As example, Nepal and Singapore were on equal economic footing in
1960, the year that Singapore instituted the first of its ongoing series of five-year plans. It built that economic base through international trade, supported with low wages, an educated
workforce and favorable tax structures designed to lure multinational organizations to establish operations in Singapore. Today, Nepal remains virtually unchanged, while the Organization for Economic Cooperation and Development (OECD)
named Singapores economy as mature nearly a decade ago. What Ifs Beginning scenario: trade deficit increases $20 billion, household savings falls $30 billion,
government spending increases $75 billion. The effect on domestic investment will be that it decreases. Increase in trade deficit coupled with decrease in savings indicates high prices that
could be attractive to new business, but the governments increase in spending places it in competition with the private sector. The total amount of money available remains the same;
reduced savings reduces the money available for banks to lend. If the military buys all available apples, then either none or very few
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