Can a country have a trade deficit forever?
What will be an ideal response?
Countries whose imports exceed exports are said to run trade deficits. Countries cannot run trade deficits forever, just like individuals cannot borrow indefinitely. This is illustrated by the fact that the revenue earned from selling exports is the primary means for purchasing imports. Thus, in some years countries will have to export more then they import to repay for their past debts.
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The above table presents data from the nation of Pacifica. When real GDP equals $2.0 trillion, aggregate planned expenditure equals
A) $3.75 trillion. B) $5.00 trillion. C) $5.50 trillion. D) $4.00 trillion. E) $6.00 trillion.
Discuss the correct and incorrect economic analysis in the following statement
"The United Auto Workers Union has successfully negotiated a 9 percent increase in wages for its workers. This increase in the wage rate causes an increase in demand for automobiles, since many consumers now have greater incomes, and also a decrease in the supply of automobiles because the cost of production has increased. These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."