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In general, should a country’s policymakers be concerned if the country has trade imbalances with other...

In general, should a country’s policymakers be concerned if the country has trade imbalances with other countries?

If your answer to the previous question is "no," are there situations in which policymakers should be concerned about running a trade deficit? If your answer is "yes," are there situations in which policymakers should not be concerned about running a trade deficit?

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Answer #1

Yes because ultimately trade imbalances have reduced development of many countries. It often leads to flight of capital.

There are situations when policy makers should not be worried. E. G some developing countries import capital equipment which ultimately results in higher growth of the economy.similarly a country like USA whose currency is used predominantly in international trade has less reasons to worry. But deficit should not become too large ultimately

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