Discuss the opposing points of view on U.S. trade deficit
Those who worry about trade deficits point out that these capital inflows create debts on which interest and principal payments must be made in the future. In this view, Americans have been mortgaging our futures to finance higher consumer spending. But another, quite different, interpretation of the trade deficit is possible. Suppose foreign investors come to see the United States as an especially attractive place to invest their funds. Then capital will flow here, not because Americans need to borrow it, but because foreigners are eager to lend it. The desire of foreigners to acquire American assets should push the value of the dollar up, which should in turn push America's net exports down. In that case, the trade deficit would still be the mirror image of the capital inflows. But it would signify America's economic strength, not its weakness.
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Suppose monetary policy results in the exchange rate falling. As a result,
A) exports do not change because they are autonomous and imports decrease. B) net exports decrease. C) exports increase and imports increase. D) exports decrease and imports decrease. E) net exports increase.
The consumption function shows the relationship between real consumption spending and
a. real wealth b. the interest rate c. expectations d. real disposable income e. debt
Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?
a. to promote efficiency b. to promote equality c. to enforce property rights d. to protect an industry from foreign competition
What happens to the price and quantity sold of a drug when its patent runs out? (i) The price will fall. (ii) The quantity sold will fall. (iii) The marginal cost of producing the drug will rise
a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i), (ii), and (iii)