Relationship among savings, investment, and net capital outflow.
1. Explain the relationship among savings, investment, and net
2. Inflation distorts relative prices. What does this mean and how
does it affect consumer spending and disposable income? Give
some examples of how inflation has affected your buying power.
3. What are the costs of inflation? Which of three costs do you think are
most important for the US. economy?
4. Describe the economic logic behind the theory of purchasing-
power parity (”PPP”). What factors might prevent PPP from
5. What is the importance of trade agreements, and how is
international trade related to the standard of living of the United
States (as opposed to that of a small industrial nation or to a
develOng nation)? What significance do trade agreements have
to your company or a company with which you are familiar?
6. Go to the website of the Bureau of Labor Statistics at
W What is the current US. unemployment rate?
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