00:01
Here we're looking at how a budget deficit can cause a trade deficit.
00:04
And to do that, we're going to look at this market for u .s.
00:07
Dollars.
00:08
So suppose that the united states is in a budget deficit, meaning that the government needs to somehow finance its debt.
00:15
To do that, it might start to sell some of its assets.
00:18
Suppose it's selling t bills to some foreign countries.
00:22
So by selling these t bills, these foreign countries, which are purchasing them, are going to need u .s.
00:28
Dollars to purchase them in.
00:29
So because of that, we're going to see an increase in the demand for u .s.
00:33
Dollars.
00:33
So our demand curve is going to shift upwards from d1 to d2.
00:38
However, at the same time that these foreign countries are demanding u .s.
00:41
Dollars, the supply of their u .s...