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Specification:

• Consumption, income, balance of payments, distribution of income

Click to read the article below and then answer the questions:

China’s record trade gap is a symptom of struggles to rebalance its economy

• “China reported the largest monthly trade surplus in its history last Friday.” Explain what is meant by a trade surplus

• ‘Households receive a lower share of the gross domestic product. . . therefore, they also consume a lower share. ‘ Explain this statement with reference to the Keynesian consumption function

• “Rising exports are usually a good thing.” Use a diagram and analyze the benefits of rising exports

• “These are symptoms of deep and persistent imbalances in the domestic distribution of income.” Draw and explain the Lorenz curve

• “Rising exports are usually a good thing, but for countries like China, rising trade surpluses are not.” Explain this statement

Gavin Clarke, Emmanuel College