Question

In: Economics

What is the difference between Current Account balance and Balance of Trade? How many years has...

What is the difference between Current Account balance and Balance of Trade?

How many years has the US been running
CA deficit?

Is it a problem for a country to have CA deficit? Why or why not?

Is it a sign of economic weakness? Why or why not?

Do CA deficits cost Americans jobs? Why or why not?

Can the US continue to run this deficit indefinitely? Why or why not?

Incorporate all these questions in your original post. Use the textbook and outside sources where appropriate.

Expert Solution

Balance of trade is defined as difference of country imports and exports.

It is one of important indicator of country balance of payments.

A country will have trade deficit if its imports exceeds the exports and vice versa is trade surplus.

Cost of production, availability of raw materials,exchange rates are factors that affects balance of trade.

Current account balance is defined as nations savings and investments.It plays major role in country economic development.Trade policies,foriegn reserves,inflation rates are factors that affects current acount balance.

Us running current acount deficit for almost two generations.

If the deficit reflects an excess of imports over exports,it may be indicative of competitiveness problems,but

Current account deficit also reflects excess of investments over savings,it could be higly productive or growing economy.without knowing these play of acts it is not posible to sah whether it is good or bad.Deficit reflects underlying economic trends which may be desirable or or undersable for a country at that particular time.

If imports are in demand than exports,domestic jobs may be lost to abroad.unemployemt exists at low levels.

Us can run deficit forever as us earns more from foreign investments overseas and foreigners earn their investments in us,which brings lot of money to us.It is a sign if economic weakness as gdp of the country decrease with significant level.

I have tried my level best to answer u hope u understand

Rahul Sunny answered 2 years ago

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