Question

Indicate whether you agree or disagree with the following statement and explain why. “When the U.S. is running a current account deficit, it is accumulating financial obligations to foreigners. Therefore, to avoid placing burdens on future generations, we should use tariffs to limit our imports.”

Answer 1

Current account deficit refers to the situation where the value of the goods and services it imports exceeds the value of the goods and services it exports . So when US is running a CA deficit , it is actually paying foreigners more than receiving income from foreigners . It is accumulating financial obligations to foreigners . Current account deficit if goes on increasing is a financial burden on the economy . So tariff and quotas should be used to limit imports . That reduces import demand and balances the CA . Yes I agree with this statement .