Suppose we are in Balance of Payment equilibrium with a trade deficit of 300. What happens to the trade deficit if the public sector sells 100 in securities to the foreign sector to finance the budget deficit?

Suppose we are in Balance of Payment equilibrium with a trade deficit of 300. What happens to the trade deficit if the public sector sells 100 in securities to the foreign sector to finance the budget deficit?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 37CTQ: Many think that the size of a trade deficit is due to a lack of competitiveness of domestic sectors,...

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Question

Suppose we are in Balance of Payment equilibrium with a trade deficit of 300.

What happens to the trade deficit if the public sector sells 100 in securities to the foreign sector to finance the budget deficit?

Definition Definition Situation in which a country spends more on imports than it makes through exports. When a trade deficit exists, net exports will be negative. Trade Deficit = (Imports) - (Exports)

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