Question

6. Should we be worried about our trade deficit? Explain why or why not.

Answer 1

Answer:

A trade deficit is neither inherently entirely good or bad, although very large deficits can negatively impact the economy. A trade deficit can be a sign of a strong economy and, under certain conditions, can lead to stronger economic growth for the deficit-running country in the future.

Explanation:

Answer 2

The most obvious benefit of a trade deficit is that it allows a country to consume more than it produces. In the short run, trade deficits can help nations to avoid shortages of goods and other economic problems. In some countries, trade deficits correct themselves over time.