...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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...Maria Tovar Trade Surplus and Trade Deficit China overtakes USA as worlds trading partner China´s Trade Surplus Vs. USA´s Trade Deficit Countries that have open economies are those who carry out economic activities with other countries and trade goods and services. Countries can export, which means selling domestic goods and services to another country or they can import, which means buying goods and services from another country. An economic surplus makes reference to having a positive balance of trade; when a country´s exports exceed its imports. On the other hand, a trade deficit is when a country´s imports exceed its exports and has a negative commercial balance. As the video: “China overtakes USA as a world´s trading partner,” suggests, China currently has a trade surplus. Between 2000-2008 China´s imports have grown 403% whilst its exports have grown 474%. China´s exports are currently higher than its exports due to its economic strategy, which will be explained below. The video explains why China has overtaken the US as world´s trading partner, and thus why China has a trade surplus and the US a trade deficit. American and many other companies are now producing and assembling their products in China due to the low manufacturing costs in this country. It is more profitable for American companies to produce and assemble their products in China not only for the low labor costs, but also for the low transport costs. Even though this harms the US´s economy, companies...
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...should immediately appreciate RMB tends to be intensive recently. US and EU claimed that the undervalued RMB manipulated by Chinese government giving rise to their trade deficit. On the other hand, China responded that trade deficits in these countries cannot be a result merely from undervalued RMB and as China has the right to choose its exchange rate policy as a sovereign country. In our analysis, undervalued RMB is not the crucial factor leading to US and EU trade deficit. Besides, it is possible that many adverse effects such as bubble burst and social turmoil occur in China. Finally, even if the undervalued RMB is the reason and RMB is appreciated therefore, other developing Asian countries will take the place of China through their undervalued currency, which would not benefit either the US nor China. Section II Our statement is based on the external and internal considerations for economies and politics of China and its major trade partners. * RMB appreciation will not necessarily reduce the other countries’ trade deficits. * Weak Link between Currency Values and Trade Flows: From 2001 to 2004, the RMB-US$ exchange rate was consistent, while the U.S. exports to China were increasing (See Figure 1). From July 2005 to July 2008, the RMB appreciated by 21 percent against the dollar while the U.S. trade deficit with China increased from $202 to $268 billion. * Nature of foreign trade is mutually beneficial and win-win. If RMB were appreciated, in the...
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...payment record is a way to allow countries to recognize potential business partners for trade and to evaluate a country’s performance in the global economic competition. . In this mini-case we will look into 4 key aspects such as Mexico’s key economic indicators, the causes of the country’s balance of payment problems, policies in which Mexico could have implemented in order to avoid the problems and the lessons in which developing countries can learn from this incident. Through these 4 key aspects, the reader would be able to gain a better understanding about Balance of Payments concepts. Trend in Mexico’s key economic indicators: balance of payments, exchange rate, and foreign reserve holdings. Yr | Balance of Trade | Current Account | Direct Foreign Investment | Portfolio Investment | Gross International Reserves | Total External Debt | Public Sector External Debt | Interest Payments | 1994 | -18.5 | -29.7 | 6.1 | 8.2 | 6.1 | 142.2 | 85.4 | 11.8 | 1995 | 7.1 | -1.6 | 15.7 | -9.7 | 15.7 | 169.9 | 100.9 | 13.6 | Mexico’s current account deficit was continuously increased from $5 billion to $25 billion during the period 1988 through mid-1994. In late 1994, it became $30 billion. Prior to 1994, Mexico experienced sharp rising trade deficits starting from 1989 and caused the current account to sink into deficit, ballooning from a deficit of US$4 billion in 1989 to US$29 billion in 1994. In the period between December 1988 and November...
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...approach is rooted in ideas which stress the importance of macro-economics, post neo-classical endogenous growth theory and the symbiotic relationships between growth and investment, and people and infrastructure”. (Brown) As we have seen here in the past few years, but more so in the last year, the economy is ever changing. Macroeconomics is the backbone of America and without a stable economy we have serious hurdles in front of us to overcome. John Maynard Keynes developed the Keynesian Theory, which has become the foundation of our government’s economic decisions. During the course of this paper I will outline Keynesian Theorists and Monetary Theorists approach to promote long-run macroeconomic stability, the impact of persistent budget deficits on the trade deficit, options available to policy makers when national savings presents opportunity to improve the trade deficit, appraise the position of the supply side as it relates to government deficits and evaluate recent national economic policies as they relate to the magnitude of the trade deficit. In essence, the inner workings and use of macroeconomics as a financial tool of study to determine how a national economy is managed and sustained. To begin, Keynesian theorists approach to promote long-run macroeconomic stability is somewhat unique. Economist who agree with Keynes’ theories believe that we live in the short run, that what occurs in the short run does not mean it will occur in the long run. Keynes’ stated, “In...
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...related keyword to quickly find the topic you need. Tip #2: If a topic is missing, please email us at support@accnerd.com. We can usually provide immediate custom support during normal business hours. 1. What is the name of the market where businesses sell products to households and government institutions? Goods market Explanation: The goods market is term that refers to the primary market where businesses interact with end users of products. 2. How would you describe Real Gross Domestic Product (GDP)? The market value of all final goods and services produced in an economy or country Explanation: Real GDP will be stated in the currency used during that year. It only includes final goods and services. 3. Who is included in underemployment figures? People who are working part time or not actively working a fulltime job Explanation: Underemployment figures show us the number of people whose skills are not being fully utilized. 4. The Bureau of Economic Analysis in the United States is responsible for what? Calculating United States gross domestic product (GDP) Explanation: The primary function of the Bureau of Economic Analysis is to produce reports related to economic activity, such as GDP. 5. The Federal Reserve is responsible for setting the… Federal funds rate Explanation: The federal funds rate is the interest rate at which the US government can borrow...
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...Balance Of Trade Difference in value over a period of time between a nation's imports and exports of goods and services. The balance of trade is part of a larger economic unit, the balance of payments, which includes all economic transactions between residents of one country and those of other countries. If a nation's exports exceed its imports, the nation has a favourable balance of trade, or a trade surplus. If imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists. Current United States Balance of Trade The United States reported a balance of trade deficit equivalent to 44 Billion USD in September of 2010. The United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world. Main exports are: machinery and equipment, industrial supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverages. U.S. imports non-auto consumer goods, fuels, production machinery and equipment, non-fuel industrial supplies, motor vehicles and parts, food, feed and beverages. Main trading partners are: Canada, European Union, Mexico, China and Japan. |Country |Interest Rate |Growth Rate |Inflation Rate |Jobless Rate |Current Account |Exchange Rate | [pic][pic][pic] |[pic][pic] to |[pic][pic] [pic] [pic][pic]...
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...USE CURRENCY POLICY TO RESTRAIN INFLATION IN VIETNAM UNDER THEORY OF IMPOSSIBLE THREES USE CURRENCY POLICY TO RESTRAIN INFLATION IN VIETNAM UNDER THEORY OF IMPOSSIBLE THREES ------------------------------------------------- VOL 108 05/2011 ------------------------------------------------- VOL 108 05/2011 MAGAZINE ON BANKING SCIENCE AND TRAINING MAGAZINE ON BANKING SCIENCE AND TRAINING INTERNATIONAL EXPERIENCE AND PRACTICE | REASON AND IMPACT OF INCREASE IN CHINESE YUAN VALUE OF CHINA NGUYEN XUAN HONGBanking Academy | | After much pressure on Chinese Yuan (CNY), China made decision on increase in their currency in 6/2010. How will this increase impact on relevant objects? This article aims to find reason and impacte of increase CNY value of Chine on Chinese economy and other countries, including Vietnam | be carefull on exchange rate policy to avoid impact on export. According to economic researcher , adjustment on CNY value may cause instability in Chinese economy due to encouraging investment, increasing independence of economy on external factor, especially when 50% of export comes from foreign-invested enterprises in current. This is contradiction that shall be considered when selecting exchange rate. | 1. CNY exchage rate development before and after increaseValue from 2005 to the date before 21/06/2010: CNY value increased due to application of margin transaction measure, holding CNY to USD rate at CNY=6.83 from 8/2007 | Besides achievement of economic...
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...- Current Account Deficit Case 1. Why has the United States developed such large current account deficits? Slow economic growth, reduced imports and spending in access of income has caused a large deficit in US current account. 2. Is the U.S. current account deficit in 2005 sustainable? Is its continual widening a problem? Is it an economic problem? A political one? Is the United States headed toward crisis? Why or why not? Yes the U.S current account deficit in 2005 would have been sustainable, but the deficit continued to widen. The NIIP went up to 27% in 2011. The continual widening of deficit is a major problem as the interest payments are growing and the capital inflow from abroad is not moving into tradable sectors. If the trade deficit sustained, the US economy will face financial crises. This is a major economic problem because this leads to severe inflation, fall in price of assets like equity and housing and will also slowdown global economy which leads to global recession. This takes US towards global crises as the slowdown or pause in economy would lead to depreciation of the US dollars which in turn will raise the import prices. This rise in import prices would lead to fewer margins and would further lead to unemployment. 3. What, if anything, should the United States do to reduce its current account deficit? The current account deficit problem can be solved by competing in the global economy by using supply policies in trade. In long run allocate...
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...China and the Yuan-Dollar Exchange Rate Q1) How credible was China’s announcement to let the yuan float? Chinese Yuan/US Dollar Exchange Rate Index, July 2005-Nov 2011 Chinese government has declared its intention to let the yuan float on 19th June of 2010, and this will most likely result in the Yuan to appreciate as the Yuan is under-valued. This reform was of the Renminbi (RMB) exchange rate regime was to enhance its exchange rate flexibility. This announcement may seems dubious because China has long adopted a fixed exchange rate regime since 1994 in which the Chinese government has maintained a policy of intervening in currency markets to limit or halt the appreciation of its currency, the RMB, against the U.S. dollar and other currencies. Known as the world’s manufacturing factory, keeping such a policy will definitely make its exports relatively and comparably cheaper to other countries, especially United States. Similarly, this will also make U.S. exports to China much more expensive, than would occur under free market conditions. As such, if China allows its yuan to float and appreciate, it may lose its competitive position as it may suffer a loss in sales of its exports due to its goods being relatively more expensive to foreign buyers. China’s announcement to let its yuan appreciate was credible because earlier on, the yuan actually appreciated 17.5 percent the U.S. dollar between July 21 2005 to July 21, 2008. In July 21, 2008 China has stopped its Yuan appreciation...
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...more money is flowing out of the country than coming in, and vice versa. Balance of payments may be used as an indicator of economic and political stability. For example, if a country has a consistently positive BOP, this could mean that there is significant foreign investment within that country. It may also mean that the country does not export much of its currency. This is just another economic indicator of a country's relative value and, along with all other indicators, should be used with caution. The BOP includes the trade balance, foreign investments and investments by foreigners. COMPARATIVE ANALYSIS OF BALANCE OF INDIAN PERSPECTIVE Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. When all components of the BOP accounts are included they must sum to zero with no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counter-balanced in other ways such as by funds earned from its foreign investments, by running down central bank reserves or by receiving loans from other countries. The balance of payments of a country is a systematic record of all transactions between the residents of a country and the rest of the...
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...should push Keynes original idea to get rich to invest and reduce our balance of trade. . According to Keynes the problem wasn’t just about getting rich to invest in economy but also huge trade deficit that the US runs. Trade deficit arises when country import exceeds export. In 1936, when Keynes wrote his classic—The General Theory of Employment, Interest and Money—he was emphatic on this point: no country, ever, should run up any kind of trade deficit, much less the trade deficit on steroids we are running. Geogehegan talks about that two lessons can be taken from this theory that is labor market doesn’t work and new institutional arrangement is needed to get us out of the debt. He talks about labor movement is justified if it can get us out of debt. Also, we should set up the wages that doesn’t require us to take any loans. Keynes points out if we lower the wages we lower the demand, and company will not hire more workers. In other words, if we lower the wage less people will go to college to earn almost the same as they can without going to college. The professor of economics in University of Chicago, Raghuram G. Ragan point out that middle class never have enough paycheck, so they have to borrow money to run up visas and to carry out mortgages. Ragan says we don’t need equality of income as long as we have equality of spending. For example, china export too much and spend too little whereas, the US spend too much on import and make too little in the U.S. Therefore, to stabilize...
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...billion in goods -Import: $367 billion $295.5 billion dollar difference -1.2 trillion in bills and bonds, and that’s only 8% of total debt Not that big of a problem: Deficit: corrects over time, large amount of us dollar being held by foreign nations. Economists worry mainly because these nations may decide to sell at any time. -This is not a problem however because since we are giving China so much money by buying their goods, China will continue to invest into the US Economy so that we continue to buy their goods. Worst case would be that China begins to invest less into the US Economy because we are not buying as many of their goods, however that would mean that the trade deficit would diminish. -more purchasing power because cheap products -can’t just look at china, but rather entire deficit, such a small factor -no possible way to have an even trade with any other nation, always will be disproportional -There is no date in which paying back is due -The US is mainly concerned because China has 1.1 trillion bonds in the US Economy but that’s more of a political problem seeing them as a threat rather than an economic problem however Japan has 1.04 trillion invested in the US Economy and anyone could invest in the economy so China really is not the real threat -Economic theory tells us that if we ever reach the point where it becomes a problem, there is an automatic adjustment mechanism, which is that the dollar will fall in value. When the dollar falls,...
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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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...account Financial assets Trade deficit Trade surplus Content Standards Standard 5: Students will understand that: Voluntary exchange occurs only when all participating parties expect to gain. This is true for trade among individuals or organizations within a nation, and among individuals or organizations in different nations. • Students will be able to use this knowledge to: Negotiate exchanges and identify the gains to themselves and others. Compare the benefits and costs of policies that alter trade barriers between nations, such as tariffs and quotas. Benchmarks, Grade 12: At the completion of grade 12, students will know • A nation pays for its imports with its exports. Lesson Overview Balance of payments accounting is an often misused and misunderstood tool for keeping track of our economy’s flow of imports and exports. While the data, itself, is neutral, it is sometimes reported in ominous tones, especially when the numbers total up to a deficit in the merchandise account. As students learn more about trade, they appreciate that a trade deficit is not necessarily bad any more than a trade surplus is necessarily good. This lesson reinforces their appreciation of that reality by identifying the components of the balance of trade. Learning about the flow of financial assets captured in the capital account should add a whole new dimension to their understanding of the full scope of trade. The accompanying classroom...
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