The US is running a large trade deficit (close to $900 bn trade deficit in goods in 2018; and more than $600 bn in goods and services). a. What is a trade deficit? b. How can a flexible exchange rate help a country reduce its trade deficit? c. Explain why, even with a flexible exchange rate, the trade deficit might not be completely eliminated.
Added by Walter S.
Step 1
A trade deficit occurs when a country imports more goods and services than it exports. In other words, it means that a country is spending more on foreign goods and services than it is earning from its own exports. b. A flexible exchange rate can help a country Show more…
Show all steps
Your feedback will help us improve your experience
Paul A. and 72 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
thoughtful analysis Status: some elements should be removed? No noise detected. No page numbers, headers, OCR errors, or navigation text. Decision: "
Nick J.
If a country has a trade deficit, what will occur? Choose one answer. a. Imports will exceed exports. b. Exports will exceed imports. c. Imports and exports will be equal. d. Currency will be devalued.
Akash M.
If a rise in trade deficit results from a decrease in the quality of your country's products. a. How would this affect net exports at any given exchange rate? b. Use a three-panel diagram to show the effect of this shift in net exports on the real exchange rate and trade balance. c. Does a decline in the quality of your country's products have any effect on your standard of living? Give a clear elaboration with example or graphs or facts (Hint: When you sell goods to foreigners, what do you receive in return?)
Alexander C.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Watch the video solution with this free unlock.
EMAIL
PASSWORD