Chapter 25
1. Importing a large amount of goods and services reconciled with self-producing a
variety of goods and services because those two facts both mean that the country is
enjoying a high standard of living. This is due to gains from trade. Being capable of
purchasing goods from other countries indicates that the economy must generate
enough income. By producing a lot of goods and services, then trading those for as
many goods and services produced in other countries, a nation can maximize its
standard of living.
2.
a. Faster short-run economic growth can be created by making more investment and
reducing consumption.
b. The change in investment and consumption could bring benefits to a lot of people in
the society, as higher incomes are guaranteed thanks to faster economic growth. On
the other hand, workers and owners in consumption industries may get lower incomes,
while workers and owners in investment-good industries would get higher incomes in
the transition progress. Also, reducing purchase to increase investment is also needed
for some groups of people.
3.
a. For instance, private consumption spending can include buying clothes. Private
