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Chapter 23: Q. 15 (page 576)
Why does a recession cause a trade deficit to increase?
During a recession, incomes fall, and consumers buy fewer goods, including imports which leads to a increase in trade deficit.
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Does a trade surplus mean an overall inflow of
financial capital to an economy, or an overall outflow of
financial capital? What about a trade deficit?
If the trade deficit of the United States increases, how is the current account balance affected?
Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
The United States exports 14% of GDP while Germany exports about 50% of its GDP. Explain what that means.
Will nations that are more involved in foreign trade tend to have higher trade imbalances, lower trade imbalances, or is the pattern unpredictable?
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