In the 1980s, some economists in the US wrote about the
so-called “twin deficits.” That is, the US experienced both a
government budget deficit and a trade deficit. Suppose that gross
investment exceeds private saving. Explain why a country with a
budget deficit must also show a trade deficit. After that, in the
late 1990s, the US experienced a trade deficit and a budget
surplus. In other words, the “twin deficits” got separated. Explain
how this is possible. (Hint: what...