...United States Trade Deficit How many times have you brought something, and you think that it was made in the United States, but when you look at the tag or the product it says made in China, or even Korea? I am sure that everyone can answer many times, and may even wonder if anything is made in the United States. Have you heard so many times that foreign cars are better than American made cars? You many also ask how this happens, so I explain how we get our products in the United States, and how if affects our economy by not actually buying products that are made in the United States. The United States trades with a lot of different countries, but the biggest competitor would be China. There was a time when Japan was the biggest competitor, but in 2000 China became our biggest competitor. (pg. 734). Trade deficit is when the United States spends more on imports than it sells. The United States imports 60 percent of oil, which raises the trade deficit by over $100 billion a year, which is a lot considering that besides Canada, we are the most energy-dependant in the industrial world, and require about a quarter ton of oil to produce $1,000 of gross domestic product. (pg. 732). One of the factors that contributes to our deficit is the rise of the dollar, what happens is the rise of the dollar depresses our exports, because it makes our goods more expensive compared to foreign goods, which makes imported goods cheaper than the American products so consumers switch...
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...US Trade Deficit 1. How large is the US trade deficit (relative to GDP)? As a percentage of U.S. GDP, the overall international trade deficit (including goods and services) was 3.7% in 2011, up from 3.4% in 2010. For the full year 2011 this equated to $558.0 billion, which included an overall deficit of $737.1 billion in goods, and a surplus of $179.0 billion in services. 2. How has the trade deficit changed recently? Why? Clearly the deficit is up, which reflects some growth in consumer spending as the unemployment rate decline late in the year and output (GDP begins to grow). For the three months ending in December, exports of goods and services averaged $178.5 billion, while imports of goods and services averaged $224.8 billion, resulting in an average trade deficit of $46.3 billion. The December 2010 to December 2011 increase in exports of goods reflected increases in industrial supplies and materials ($6.0 billion); capital goods ($2.2 billion); automotive vehicles, parts, and engines ($1.8 billion); consumer goods ($0.1 billion); other goods ($0.1 billion); and foods, feeds, and beverages ($0.1 billion). The December 2010 to December 2011 increase in imports of goods reflected increases in industrial supplies and materials ($9.2 billion); capital goods ($4.7 billion); automotive vehicles, parts, and engines ($3.1 billion); consumer goods ($2.1 billion); foods, feeds, and beverages ($1.1 billion); and other goods ($0.3 billion). 3. Do you expect this trend to...
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...Evaluate the view that an increasing deficit in UK trade in goods is a major problem for the UK economy. A trade deficit is a situation in which the amount of imports being purchased by the country is greater than the exports being produced A fall in exports for the UK could have many effects on the UK. One of which is a negative impact on aggregate demand. Judging by the equation AD=C+I+G+X-M so if X decreases so will AD. There would be a fall in national output; this would create a multiplier effect on incomes and spending. Inturn this could cause a slow down in the economy or a recession. Also the actual GDP could fall below the potential GDP. This would happen because the AD would fall so companies start to lay people off so unemployment would rise. It would have a massive effect on businesses because it would hit their profits and therefore their business confidence. Government finances would also be affected because if there is slower growth they would receive less money in tax revenues, they would also have to spend more on welfare benefits so national debt would be ever increasing. Finally some areas are more dependant on exports than others. For example the north is more dependant than the south so it could worsen the north south divide. If there is less demand the incentives to investment in order to get ahead of competition isn’t as good so company wont invest in more capital or research and development. The lack of AD can lead to plant closures and job...
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...one. Buffett is betting that American trade deficit will not be restored and the country’s practice of borrowing from abroad to pay for the current goods and services will not stop. The USA borrows from abroad to finance its trade deficit, on top of that the USA government spends more money than it takes from taxes. The budget deficit increases the gap between country’s national savings and national income and and also widens the deficit in the current account by necessitating the country to borrow more money from other foreign countries. This widened current deficit puts strain on the USA currency in the financial markets. If Americans are going to buy inexpensive imported goods and the USA government has a budget shortage, I think Warren Buffett is making a fantastic move by betting against the dollar. Between 2002 and 2007 the dollar has fallen by 40 percent. 2. Why has the United States developed such large current account deficits? I and a lot of people believe the United States has developed such a large current account deficit is the trade deficit. The USA is importing more goods and services more than it exports so it has held trade deficit since the late 1960s and this trade deficit has been mushrooming at an unbelievable rate since 1997. The increasing oil prices in the last few years has helped increased the current account deficit too. Another reason for the current account deficit could be attributed to the budget deficit. In almost every year the government...
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...budget deficits today will reduce the growth rate of the economy of the future. The difference between what a government spends and what it collects in taxes in a given period is known as a budget deficit. There are many reasons why this might happen. One might be that if our government keeps spending money that does not exist obviously the more debt will accumulate. The government cannot keep this up without creating more debt. It the same as budgeting you personal accounts. If you get a new credit card or loan to consolidate old debt and then re-use your old cards, it rather defeats the purpose of getting out of debt. Another reason might be that due to the enormous loss of jobs there are less taxes being paid to pay our nations bills or to re-invest back into the economy. There is no point to list these reason in number order there are so many. If the deficit is growing it affects the nation savings, in turn, reduces national income. This may become possible if interest rates go up or domestic investments fall. Economists agree these a few things on when it comes to a high deficit. Deficits over a short period do not really have much affect, because the United States can borrow to cover these gaps due to the dollar’s value as the leading currency. If the deficit is sustained over a long period then is does have more an affect on the national debt. This will drive the interest rate payments up and takes away from the resources. When collective deficits reach 90%...
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...The United States deficit contributes to its debt and the debt contributes to the deficit. We know the longest running uninterrupted surplus for the Unites States was from 1920 to 1930 but spent most of it combating the war. This will show how the U.S. deficits, debt, and surplus affect the following areas; the taxpayers, future social security and Medicare users, unemployed individuals, University of Phoenix students, The United States financial reputation on an international level, a domestic automobile manufacturer (exporter), and a Italian clothing company (importer). Taxpayers This will show how the debt and deficit affects taxpayers. Taxpayers get caught up in the government debt and are left to pay it off. Individual debt is different from government debt, and the reasons for this are: (1) the government lives forever and people don’t, so the government is ongoing. When people die, all debts must be paid to old Uncle Sam before relatives get the reminder. (2) The government can print money and people cannot, and as long as another country accepts our currency, we can always exchange money with those countries. (3) The government owes much of it debt to itself. It is sort of like owing oneself so one will never go broke. The internal debt which is the debt owed to other governmental agencies or to its own citizens, and when it pays on its internal debt it involves a redistribution of the citizens but it does not reduce the income of the citizens. For example...
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...the Greek economy, and a sudden crisis in confidence among lenders. In late 2009 fears developed about Greece's ability to meet its debt obligations, due to revelations that previous data on government debt levels and deficits had been misreported by the Greek government.[5][6][7] This led to a crisis of confidence, indicated by a widening of bond yield spreads and the cost of risk insurance on credit default swaps compared to the other Eurozone countries – Germany in particular.[8][9] In 2012, Greece's government had the largest sovereign debt default in history. On June 30, 2015, Greece became the first developed country to fail to make an IMF loan repayment.[10] At that time, Greece's government had debts of €323bn.[11] The 2001 introduction of the euro as a common currency reduced trade costs among the Eurozone countries, increasing overall trade volume. However, labour costs increased more in peripheral countries such as Greece relative to core countries such as Germany, making Greek exports less competitive. As a result, Greece saw its current account (trade) deficit rise significantly.[12] A trade deficit means that a country is consuming more than it produces, which requires borrowing from other countries.[12] Both the Greek trade deficit and budget deficit rose from below 5% of GDP in 1999 to peak around 15% of GDP in the 2008–2009 periods.[13] Another potential driver of the inflow of investment into Greece was its membership in the EU, which helped lower the yields on...
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...Fiscal Policy ECO/372 June 1, 2015 Alan Beideck Fiscal Policy The United States deficit, surplus, and debt influences the economy in a number of ways, and it creates an impact on taxpayers, social security and Medicare users, unemployed workers, and students. These issues also affect the countries financial reputation, exports, imports and the Gross Domestic Product (GDP). The U.S. economy is experiencing a budget deficit and outstanding debt, and the outlook is not good for taxpayers. If these two items do not get under control, future generations will be left to pick up the pieces and will have to try to find a way to maintain and control the budget. Taxpayers Taxpayers are the people that pay and contribute to state revenue. Government deficits affect taxpayers by increasing taxes and interest. "Inflation also affects the deficits by affecting the size of social security payments, federal pension payments, and interest on the federal debt. The deficit and surplus are sensitive to the business cycle" (Deficits, Surpluses, And Debt, 2015). "If the government use surplus it would "give tax cuts to taxpayers, increase income transfers, pay down national debt and spend it on goods and services" (Deficits, Surpluses, And Debt, 2015). Future Social Security and Medicare users The Social Security program began in 1935 and benefits have always been paid on time, even with modified laws over the years. Benefits are expected to continue to be paid on time through...
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...Fiscal Policy Paper Deficit can affect multitudes while a surplus creates positive results for those on the receiving end. A debt requires the liability to be paid or the liability may be repossessed or rendered bad credit to the individual. While Americans face issues with debt, surplus, and even deficit it is important to know that the United States deals with it first hand as well. Several areas the three topics affect include tax payers, unemployed, Social Security, Medicare, imports, exports, and the GDP. A synopsis of Team B’s discussion of the topics follows. Tax Payers Taxes are imposed on the United States by three categories; federal, state, and local government. Tax payers are taxed on their income, payroll, property, sales, imports, estates and gifts, as well as various fees. Tax payers are required to file tax returns whether it be for a business, corporation, or individual. Tax payers are affected by the U.S. deficit when there is a shortfall in revenue which is the result from the National Debt increasing. Additionally when there is a surplus tax payers are affected as well. Future Social Security and Medicare Users Social Security Administration figures that by the year 2040 the SS trust fund will be used up causing utilizing one of three options: borrowing, increasing revenue, or lowering benefits. The Medicare program is estimated to be much closer to crisis than the SS trust fund. In contrast to current Medicare and Social Security benefits budget...
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...Week five Fiscal Policy Paper * Depending on the time, the economy can have many financial stages. There are times when the economy is facing a budget deficit, which means the tax revenues in the government are lower than the government expenditures. The economy can also experience a surplus and high debt, which can also drain an economy. The state of our government can affect people from taxpayers, to the elderly who are collecting social security, to children needing medical and governmental benefits for their well-being. The government debt situation can be either an advantage to the population by lowering taxes, or a disadvantage by making taxes higher. * To know how taxpayers, future Social Security and Medicare users, and unemployed individuals are affected by the U S.’s deficit, surplus, and debt. It is important to understand the definitions of deficit, surplus and debt. Surplus occurs when there is more supply than demand, as in extra resources. Deficits occur when a government's expenditures exceed the revenue that it generates. Debt is an amount owed to another person or government in economics. * Taxpayers can benefit from a budget surplus. A surplus can create a reduction in the tax rate which leads to a higher consumer’s savings rate. The less taxes that consumers have to pay allows spending or savings in other areas. An increase in national savings (reduction in tax rate) also creates additional money that can be available for banks to...
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...Italian Clothing Company The deficit, surplus, and debt of the United States affects an Italian Clothing Company because; when it comes down to the United States deficit, it would cause the market to be over-run by foreign products. The rate in which a country is exporting is not at the level with it’s’ exports, a surplus would lead to more importation by the Italian Clothing Company and debt, it would cause the imports to be reduced (because many business partner would be hesitant to do business with the importer. Gross Domestic Product (GDP) Effects on Italian Clothing Budget Deficit Expansionary polices, such as those incorporated into an economy during a recession, have positive effects for imports. Increasing the money supply will increase an American consumer’s option to purchase more foreign goods such as Italian clothing (Colander, 2010). Budget Surplus Contractionary policies, such as those that may occur in an economy operating at its productive capacity will have a negative effect on the purchase or Italian clothing. Levels of trade with foreign countries will decrease from the peak productive period. Debt Initiatives to pay-down the United States debt could have a negative effect on the economy, thus reducing the demand for Italian clothing. However, if efforts to lower the debt are successful there will be less tax burden on consumers in the future leading to more opportunities for foreign trade. An Italian Clothing Company (Importing) When the...
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...has learned that deficits, debts, and surpluses are accounting measures. There are many things to consider as important whether a budget is in surplus or deficit. The true importance is the health of the economy. The state of the economy needs to consider when to make a decision about whether deficits or surpluses are beneficial for the United States. Taxpayers have implemented how their money is in use when paying off deficits and how surpluses are in use to give back to the country. Debates of how taxpayers should use their money extremely important on how it affects deficits, debts, and surpluses. One debate is about how concerned an individual should be about deficits involves the future of the Social Security System and Medicare users. Unemployed individuals depend on these types of benefits and the number of users affects the accounting measures. To discuss the United States deficit, here are some examples of opinion from a University of Phoenix student. In addition, part of our discussion will illustrate the United States financial reputation on an international level. This will include an example of importer and exporter. Our team will give an example of an (importer) an Italian clothing company and for an (exporter) a domestic automotive manufacturing. Understanding accounting measures involves the health of the economy, which can be determined by the measure of the gross domestic product (GDP). When the United States is facing a deficit or debt the taxpayers...
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...The United States federal deficit is continually contracting or expanding depending on how expenses paid match up to incoming revenues. A government policy which implements either expansionary or contractionary policies greatly influences the size of the deficit as well as any surpluses gained. Because deficits and surpluses are such an integral part of our economy, the way they affect almost every sector of our lives can be far reaching and long lasting. In this paper we will evaluate some general side effects of having either a surplus or a deficit and how they affect specific areas of our lives. Taxpayers If the economy is in a recession, taxpayers have a budget with minimal amount of money to spend on goods or services. The tax rates change because of the number of employed individuals working in a year. If the economy is going through an inflation period, the government has options for those extra funds. One option, if the government has run budget deficits in the past, is to use surplus funds to retire the debt accumulated from those deficits, as Mankiw discusses in his book (Hall, 2012.) Another option is for some of the money to be given back to the taxpayers for boosting the economy with purchases of merchandise for households. A third option for the government would be to direct the surplus funds toward other spending, such as improved infrastructure, new domestic programs or additional defense spending (Hall, 2012.) Future Social Security and Medicare Users Taxpayer...
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... Jingze Yuan The government budget deficit is the difference between government revenue (mostly taxes) and government spending; the current account deficit is the difference between exports and imports (there are some adjustments for items such as funds sent abroad). Both deficits occur when someone is spending more than they earn; during the last 25 years the US government has tended to spend more than it collects in taxes and US residents have tended to spend more on imports than they export. A nation’s current account deficit reflects excess domestic spending. Equivalently, a current account deficit equals the excess of domestic investment over domestic savings. Regarding the Twin Deficit approach, Bernheim argues that if world capital markets are integrated and Ricardian equivalence does not hold, an increase in the budget deficit will almost certainly contribute to the current account deficit. A regression of the current account on the budget deficit (both scaled with GDP), while controlling for business cycle effects using growth and lagged growth gives a coefficient of 0.3 on the budget deficit in the case of the U.S. and similar figures for Canada, U.K. and Germany. Furthermore, tax smoothing implies a one-to-one relationship between the current account and the fiscal deficit. The underlying mechanism is that a constant tax rate induces the budget deficit to move one-to-one with public spending and therefore with the current account...
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... G REECE White Paper - Impact of Greece Crisis Global Research Limited Introduction Historically, financial crisis tend to lead to sharp economic downturns, low government revenues, widening government deficits, high levels of debt, pushing many governments into defaults. This is called SOVEREGIN DEBT CRISIS. GREECE is currently facing this, it accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid. As the crisis has unfolded and there was liquidity crunch in world economy, Greece may no longer be able to rol over its maturing debt obligations. Build – Up To The Current Crisis Between 2001-2008, Greece reported budget deficits averaged 5% per year, compared to Eurozone average of 2%. Also, its current account deficits averaged to 9% per year compared to Eurozone average of 1% Greece funded these twin deficits by borrowing in international capital markets, leaving it with chronically high external debt (115% of GDP in 2009) Some of the facts which can be depicted from following charts : www.capitalvia.com 2 White Paper - Impact of Greece Crisis G lobal Research Limited How Country Debts And Budget Deficits Compare? Projected budget deficit for 2009 Budget deficit figs as % of GDP Debt as % of GDP 68.6% UK 13% 112.6% Greece 12.5% 54.3% Spain 11.25% 65.8% Ireland 10.75% 114.6% Italy 5.3% 74.3% Germany 3.5% Source: European Commission /...
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