ECON 3535 1st Edition Lecture 3 Current LectureCurrent Events:- Obama State of the Union Address over the course of 10 years = $320 billion in tax increases- 1) capital gain = appreciation of assets (stocks)o long-term capital gains tax rate = 20%o Obama = 28%2) inherited assets - $400K stocks = $1M $600K capital gain- Obama: tax capital gain on inherited assets $120K = tax bill (20%)3) create a $500 tax credit for two-earner households with income cap 4) increase in childcare tax credit from $1,000 to $3,000 a year- 90% of top stocks = owned by 10% of U.S. population- middle class will have more disposable income to spend- interest rates won’t affect wealthy spendersThe Resource Paradox: 1) resource pricing2) currency a. GDP net exports (NX) = measures current account trade i. $ value of exports - $ value of importsii. countries that export significant amounts of natural resources tend to have a +NX when resource prices are high iii. domestic exports > imports (X = +) current account surplus3) currency tends to appreciatea. currency appreciation domestic price of imports decreasesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.b. decreasing price imports for domestic consumersc. foreign buyers = prices rise4) exchange rates - assuming that exchange rates have little to no effect on the exports of natural resourceso a + b = domestic currency appreciation makes non-resource firms less competitive both domestically and in foreign markets - import substitution by domestic consumers only natural resources are left; the economy becomes dependent on the export of natural resources- currency aligns with natural resource fluxuation - decreasing natural resource prices = depreciation of currency- big firms will ride out currency fluctuations, but smaller firms struggles immensely- governments will often open up markets in order to stabilize the economy- if natural resource prices increase, surplus exports occur then, the currency appreciates which causes import
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