Question

Do domestic residents experience a higher or lower standard of living if an economy experienced a national deficit as opposed to a national surplus? please explain. which countries does the United States not engage in trade with and why? Does trade mark all countries and domestic consumers better-off? Please explain

Answer 1

A national deficit is a budget deficit for a country when its expenses are greater than its income. A deficit augments a country's sovereign debts and rate of interest on debts rise which makes it difficult for a country to raise funds in order to cover its debts. Ultimately, when country's income falls less output will be produced and more will be imported than exported which will lead to trade deficits and thus domestic residents will experience a lower standard of living as demand weakens in the long run the impact is more drastic as domestic currency losses value relative to other currencies.

Initially there were many restrictions and trade barriers which gradually were removed as the Central American free trade agreement that created free trade to the south of Mexico and US. Also, free trade began between US and six other central american countries and later more free trade agreements were initiated. So, US trades with all the countries in the international markets.

Trade doesnot mark all countries better off or its domestic consumers are always advantagious.

When a country allows trade and is an exporter of some good its domestic producers will gain profits but consumers because they have to pay a higher price as trade forces price to compete with international markets.