okay got one more and in this one I need help, cuz I simply don't understand it!!
The question:
S^P=I+CA-S^G=I+CA+(G-T) this equation tells us that to reduce a current account deficit , a country must increase its privat savings , reduce domestic investment, or cut its government budget deficit.
Nowadays , some people recommend restrictions on imports from china ( and other countries) to reduce the American current account deficit.
-How would higher U.S.current aacount deficit?
-Do you agree that import restrictions would neccessarily reduce a U.S current account deficit...
Okay I am not asking for the answer but an explanation in an easy language:)
anybody?!?!?!?
Sure, let me explain the question and the concepts involved in a simpler way.
The given equation S^P=I+CA-S^G=I+CA+(G-T) suggests that to reduce a current account deficit, a country can do three things: increase its private savings, reduce domestic investment, or decrease its government budget deficit.
Nowadays, some people are suggesting restrictions on imports from China and other countries as a way to reduce the American current account deficit. So, the questions are:
1) How would a higher U.S. current account deficit affect the economy?
A higher current account deficit means that the United States is importing more goods and services from other countries than it is exporting. This can have various implications on the economy, such as increased borrowing from foreign countries to finance the deficit, potentially leading to a higher national debt. It may also impact industries and jobs in the domestic market.
2) Do you agree that import restrictions would necessarily reduce a U.S. current account deficit?
This question asks whether imposing restrictions on imports would definitely reduce the American current account deficit. The answer is not straightforward because it depends on various factors and the specific situation. Import restrictions can potentially reduce imports, which would decrease the current account deficit. However, it can also have adverse effects such as retaliatory actions by other countries and potential disruptions in global trade.
It's important to consider that reducing a current account deficit is a complex issue with no easy solution. Various strategies can be employed, including those mentioned in the equation and other economic policies, to achieve a more balanced current account.