Question

Why trade deficits are often seen as harmful to an economy by lowering a
country’s living standards considerably.

URGENT PLEASE GIVE ANSWER

Answer 1

Trade deficit is defined as excess of imports over exports. It is also called negative balance of trade.

Trade deficit is seen as lowering standards of living because when a country faces a trade deficit continuously, it implies that it is outsourcing its jobs to other countries from where it is importing. Due to this, the employment and incomes falls in the domestic country.

Moreover, more imports implies that there is lesser job creation in the domestic industry. This also affects the economic growth in the country.

Hence, due to these reasons, trade deficit lowers the living standards in a country.