Trade Deficit

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  • Topic: Macroeconomics, Balance of trade, Current account
  • Pages : 4 (1465 words )
  • Download(s) : 94
  • Published : March 24, 2013
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Trade Deficit and Current Account Deficit
[Name of the Writer]
[Name of the Institution]

Trade Deficit and Current Account Deficit

Critically examine this statement, “Current Account Deficits do not seem to matter anymore – the US$ appears to remain unaffected by escalating US trade deficits”, by reference to the “Balance of Payments Approach” to exchange rate determination The trade deficit of the US is at exorbitantly high levels. Many economists suggest that depreciating the US dollar would help put a squeeze on United States enthusiasm for globally produced goods. Since this move of depreciation would inherently curb the exaggerated import costs that the US so loves to incur. Furthermore, these three critical factors essentially would help limit the import prices incurred by US due to the trend of rising demands that has permeated in the societal culture: * The practice of using USD for US trade invoicing;

* Exporters concerns on market share dynamics, and;
* The outrageous US distribution costs.
$759 billion is the aggregated US trade deficit in 2006. This is six percent of the actual nominal GDP of the country. One of the biggest contributory factors is the impasse of plethora of imported goods from foreign lands. In the perspective of numerous investigators and policymakers, dollar depreciation remains a crux system for tending to this export-import imbalance and restoring the worldwide competitiveness of American producers. Indeed in principle, a weaker dollar might as well raise the expense of different merchandise for U.S. consumers, in this manner diminishing U.S. mandate for imports in the meantime that it helps gather interest by foreign nations for U.S. products by making the country's exports increasingly cost-focused abroad. My investigation uncovers that dollar depreciation is unrealistic to shut the exchange crevice courageously. To make sure, remote request for U.S. exports may as well develop, as speculation predicts. Since...
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