Economics

Economics

THREAD 1

Title: US Current Account Trade Deficit Narrows

Trade deficit in accordance with the economic theory must not be attributed to the bad situation, which often rectifies itself with time. However, a deficit has been growing and reported in the US for the past few decades, which has made some of the economists worried. This means that huge amounts of the United States currency are being held by other countries, which may determine to trade at their will (Williams and Donnelly, 2012). A large increase in dollar sales can drive the value of the currency down, making it more costly to purchase imports. The reasons for this could be the purchase of huge quantity of oil from the foreign countries and also the purchase of those goods that are not grown by U.S itself. Also the war on terror that has been started by the U.S has made some great expenditure that has resulted in great outflow of Dollars from the U.S resulting in great deficit. The reason for economists to have concern about the trade deficit of US is this that as in this kind of trade, the level of exports of a country i.e. US in this case, is comparatively less as compared to the level of its imports. This eventually results in the exceeding of the amount that is to be paid to the foreigners from whom the products/ services have been purchased. This might result in devaluing of the dollar that will ultimately affect the reputation of US in the global market (Williams and Donnelly, 2012). It can have an adverse affect when we talk about the stock market.

The balance of trade of a country is directly related to the global imports and exports. In fact, shift or changes in global imports and exports certainly affect the ...