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[According to David Autor, what is the impact of trade among consenting nations on national GDP?]

It raises the GDP in all participating nations.

[How are the benefits of trade characterized at the individual level versus the aggregate level?]

They tend to be small at the individual level but large in aggregate.

[Trade grows the 'national pie,' meaning no one necessarily needs to have a _____ slice.]

Smaller

[What role do policymakers play in managing the gains from international trade?]

They use various levers to ensure gains are more broadly shared.

[What is the primary risk of trade if there is no policy intervention?]

It will almost necessarily harm some individuals and industries.

[In what way are the adverse impacts of trade distributed across a population?]

They are highly concentrated among specific worker groups and locations.

[How do inter-industry linkages affect trade-induced employment impacts?]

They magnify impacts by creating adverse spillovers to other sectors.

[What is the author's critique of current trade adjustment programs?]

They are too small to be economically consequential.

[International trade integration is described as creating diffuse benefits and _____ costs.]

Concentrated

[Which historical event overturned the 'benign view' of trade's limited impact on developed countries?]

The China Shock

[What policy should be modernized to mitigate harms for trade-impacted industries?]

Trade adjustment programs

[Name one specific type of insurance recommended for workers displaced by trade.]

Wage insurance

[What US tax credit is cited as a model for work-contingent wage support for displaced workers?]

Earned Income Tax Credit (EITC)

[According to David Autor's 2019 research, which educational group experienced the highest cumulative change in real weekly earnings since 1963?]

Graduate degree holders

[For working-age men, which educational group saw a negative cumulative change in real weekly earnings between 1963 and 2017?]

High school dropouts

[In the context of occupational employment shares from 1970–2016, which category saw the most significant decline?]

Production

[Which two occupational categories saw the largest positive percent changes in employment shares since 1970?]

Professionals and Technicians

[Since 1945, what has been the long-term trend of manufacturing as a share of total US nonfarm employment?]

A steady and continuous decline.

[When did the total number of persons employed in US manufacturing reach its historical peak?]

The late 1970s

[According to McKinsey Global Institute, what percentage of occupations have at least 30% of work activities that could be automated?]

60%

[What factor, fueled by technological progress, could increase the demand for work despite automation?]

Productivity growth

[By 2030, how many workers globally might need to switch occupational categories due to automation?]

75 million to 375 million

[What specific human skills are expected to become more important as a result of automation?]

Social and emotional skills, creativity, and high-level cognitive capabilities.

[In the example of personal computers, technology created more jobs than it destroyed, primarily _____.]

Outside the industry itself

[Regarding the personal computer example (1970–2015), which industry category saw the largest job creation?]

Computer-utilizing industries (Utilizers)

[Which industry's jobs were directly destroyed by the rise of personal computers?]

Typewriter manufacturing

[In the automotive example (1910–1950), which group within the 'Utilizers' category saw the highest job growth?]

Truck and tractor drivers

[What was the net percentage of the 1950 civilian labor force created by automotive technology?]

Approximately 11%

[Most trucking businesses in the US fall into which firm-size category?]

Nonemployer (self-employed)

[In the Acemoglu and Restrepo framework, what is the 'displacement effect' of automation?]

The reduction in the demand for labor, wages, and employment due to task automation.

[What is the 'productivity effect' in the context of automation and labor demand?]

Lower costs in automated tasks increase demand for labor in nonautomated tasks.

[How does 'capital accumulation' serve as a countervailing force to automation's displacement effect?]

New capital requires human labor to design, produce, sell, and repair it.

[Define the 'deepening of automation' as a labor-demand force.]

Increased productivity of machines in tasks already automated, which can raise demand for labor.

[What is the 'reinstatement effect' in labor market theory?]

The creation of new tasks that increases the demand for labor and counterbalances displacement.

[Why might the sum of countervailing forces (productivity, capital, deepening) be insufficient to help workers?]

They may not be large enough to prevent the labor share of national income from falling.

[According to Acemoglu (2021), how can AI facilitate 'behavioral manipulation' by firms?]

By using big data to identify consumer biases and push them toward utility-reducing choices.

[In terms of labor market harms, AI may lead to a loss of economies of scope in _____.]

Human judgment

[How does unregulated AI potentially threaten democracy through social media?]

It creates echo chambers that propagate false information and polarize society.

[What 'Big Brother' effect is associated with unregulated AI technology?]

The increased ability for governments to monitor and eliminate dissent.

[According to Acemoglu (2021), the economic and social harms of AI are avoidable if the technology is _____.]

Regulated

[Which educational group's real earnings have been most stagnant or declining since the 1980s?]

High school dropouts

[What is the primary reason labor market adjustments to trade are often slow?]

Weaknesses and amplifying forces like displacement concentration impede the adjustment.

[Under the midpoint automation scenario for 2030, what percentage of the global workforce must transition occupations?]

3% to 14%

[Which specific industry's decline was cited as a selection for large sector employment shifts in India during the late 1980s?]

Agriculture

[How does the 'reinstatement effect' specifically assist displaced workers?]

It creates a larger pool of new tasks where they can be employed.

[What dark side of AI involves firms taking more consumer surplus through price discrimination?]

Pricing violations

[What is the predicted effect of AI on the power balance between workers and employers in the workplace?]

Workers may become less powerful and more dispensable.

[Name one example of 'new tasks' created in the 19th and 20th centuries to offset automation in textiles.]

Design, engineering, or back-office management.

[According to FRED data, what happened to manufacturing employment numbers during the 2008 financial crisis?]

They experienced a sharp and significant drop.

[In the trucking industry, 'Specialized freight trucking' typically has higher _____ per employee compared to local freight.]

Payroll

[In the context of macroeconomics, what does a 'closed economy' assume regarding international interactions?]

It assumes there is no trade or capital flows across national borders.

[What is the primary objective of Topic 8 regarding the macroeconomic model developed in previous topics?]

To extend the closed economy model to study the impact of shocks and policy in an open economy.

[Which account records international trade in goods and services such as cars, electronics, and college education?]

The Current Account.

[What type of activities are recorded in the Capital and Financial Account?]

Cross-border capital flows, including purchases of Treasury bonds, real estate, equities, and Foreign Direct Investment (FDI).

[What is the fundamental accounting relationship between the Current Account (CA) and the Capital/Financial Account (KFA)?]

CA + KFA = 0.

[If a country has a trade deficit, what must be true about its capital flows according to the Balance of Payments identity?]

Capital must be flowing into the country (KFA > 0).

[Which specific balance measures the net exports of goods only?]

The merchandise trade balance.

[According to the slides, how does the U.S. merchandise trade balance typically compare to its services balance?]

The U.S. has a sizable deficit in goods and a modest surplus in services.

[Formula

Current Account (CA)]

CA = NX + NFI, where NX is net exports and NFI is net foreign income.

[In Balance of Payments accounting, how is a Ford vehicle exported from the U.S. to Germany recorded?]

As a positive entry in the Current Account.

[In Balance of Payments accounting, how is a Porsche imported from Germany to the U.S. recorded?]

As a negative entry in the Current Account.

[Why does the U.S. typically maintain a modestly positive Net Foreign Income (NFI)?]

Primarily due to the profits generated by U.S. multinational corporations.

[Which country is currently identified as the largest borrower and debtor nation in the world?]

The United States.

[What is the term for the balancing item used to account for measurement issues in the double-entry Balance of Payments system?]

Statistical discrepancy.

[Explain the implication of CA < 0 for a nation's asset holdings.]

The nation must sell assets to foreigners or borrow from them to finance the expenditure gap.

[Concept

Net International Investment Position (NIIP)]

[As of July 2025, what was the approximate U.S. Net International Investment Position (NIIP) as a percentage of GDP?]

-86.3% of GDP.

[Approximately how much of the U.S. liability to foreigners is composed of U.S. Treasury bills and bonds?]

9 trillion dollars.

[A country is classified as a 'creditor' when its Net Foreign Assets (NFA) are _____.]

Positive.

[Formula

Evolution of Net Foreign Assets (NFA) over time]

[Why are 'Asset Revaluations' included in the NFA evolution formula?]

To account for fluctuations in asset prices and changes in exchange rates.

[If a student starts with zero assets, spends 80,000 on tuition via a loan, and has no income, what is their NFA at the end of the year?]

-80,000 dollars.

[According to the national saving-investment identity for an open economy, S_P + S_G = _____.]

I + CA.

[Under what condition is a persistent current account deficit considered 'unsustainable' for an economy?]

When the capital inflow primarily finances government debt and consumption rather than productive investment.

[What determines if a large Current Account deficit is 'bad' for an economy?]

It depends on whether the funds are used for productive investments or for consumption/wasteful activities.

[Why might a Current Account deficit financed by equity be less worrying than one financed by debt?]

Debt requires fixed interest payments that can lead to payment difficulties and crises if investment fails.

[In a 'small, open economy' model, what is the key assumption regarding the real interest rate?]

The economy takes the world real interest rate (r_w) as given and cannot influence it.

[Formula

Equilibrium condition in a small, open economy]

[In a small open economy where r_w = 5%, S^d = 800, and I^d = 1200, what is the Current Account balance?]

-400.

[If a small open economy has a CA = -400, what is the value of its Capital Financial Account (KFA)?]

400.

[When desired national saving exceeds domestic investment in a small open economy, the country runs a Current Account _____.]

Surplus.

[How does a shift to the left in domestic investment demand (I^d) affect the Current Account of a small open economy?]

It moves the Current Account toward a surplus (or reduces the deficit).

[In a model with two 'large, open economies', how is the world real interest rate determined?]

It is determined endogenously where the sum of the Current Accounts equals zero (CA_H + CA_F = 0).

[Formula

Current Account balance in terms of saving and investment]

[If CA_H = -1400 + 20,000r and CA_F = -600 + 20,000r, what is the equilibrium world real interest rate?]

0.05 (or 5%).

[In a two-country model, if the Home country has a Current Account deficit of 400, what is the Foreign country's Current Account balance?]

+400.

[How does an event that shifts the Home country's I^d curve to the left affect the world real interest rate?]

It causes the world real interest rate to decrease.

[In a large open economy, why does a decrease in Home investment demand lead to a decrease in the Foreign Current Account surplus?]

The resulting lower world interest rate reduces Foreign saving and increases Foreign investment demand.

[What is the two-step heuristic for analyzing shocks in a large, open economy?]

1) Analyze interest rate change as if closed; 2) Analyze CA change as if small open given that interest rate change.

[Which three factors primarily determine the dynamics of the NFA-to-GDP ratio over time?]

The real interest rate (i - pi), the real GDP growth rate (g), and the Current Account ratio (CA/Y).

[How does a high real interest rate relative to GDP growth affect a nation's debt accumulation?]

It causes debt to accumulate faster as interest payments outpace economic expansion.

[What effect does high real GDP growth have on the ratio of net foreign assets to GDP?]

It lowers the ratio (reduces the relative burden of debt).

[Formula

Change in NFA/Y ratio (approximate)]

[Why is the Current Account balance considered a 'flow' variable in relation to NFA?]

Because it represents the change in the 'stock' of net foreign assets over a specific period.

[In the Balance of Payments, if Goldman Sachs produces investment services in Tokyo, how is the income recorded for the U.S.?]

As a positive entry in the Current Account.

[Which U.S. account tracks the purchase of foreign equities by U.S. residents?]

The Financial Account (as an outflow).

[What is the relationship between domestic saving, domestic investment, and the current account?]

S^d - I^d = CA.

[If a country has S^d < I^d, it must be a net _____ from the rest of the world.]

Borrower.

[In a small open economy, if the world interest rate r_w increases, what happens to the Current Account balance?]

The Current Account balance increases (moves toward surplus).

[What is 'Foreign Direct Investment' (FDI)?]

Investment made by a company or individual in one country into business interests located in another country.