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Suppose that over the next 5 years, the US goes little by little from a large trade deficit to a modest trade surplus and this happens entirely by market changes (e.g., consumer and investor preferences) rather than through any policy changes by either us or our trading partners. How would you characterize this transformation? What do you think it reflects and what impact, if any, would this transformation from deficit to surplus nation have on the macroeconomy in the US? Explain your reasoning.
Tags: Suppose that over the next 5 years the US goes little by little from a large trade deficit to a modest trade surplus and this happens entirely by market changes (e.g. consumer and investor preferenc
Report abuseFriedman believed that deficits would be corrected by free markets as floating currency rates rise or fall with time to encourage or discourage imports in favor of the exports, reversing again in favor of imports as the currency gains strength. In the real world, a potential difficulty is that currency markets are far from a free market, with government and central banks being major players, and this is unlikely to change within the foreseeable future. Nevertheless, recent developments have shown that the global economy is undergoing a fundamental shift. For many years, the U.S. has borrowed and bought while in general, the rest of the world has lent and sold. However, as Friedman predicted, this paradigm appears to be changing.
Welcome to YabYab, im pathetic at economics but we have plenty of people here who have studied it at a degree level good luck
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