Question

4. The U.S. has had a persistent current account balance deficit for over two decades. In 2016, the current account balance deficit was equal to $481 billion:

A. What is the definition of the current account balance? What categories of international transactions are included as part of it? Please give at least two examples of types of transactions that are included in each major category included in the calculation of the current account balance.

B. Why does the U.S. have a huge current account balance deficit? Do you believe the sustained deficit causes a potential danger for the U.S. economy? Please explain why.

C. Some economists have argued that the massive U.S. current account balance deficit does not constitute a major problem for the U.S. economy due to Dark Matter.” What is “Dark Matter” in this context and do you agree with these economists that the large current account balance deficits do not pose a major economic problem for the U.S. in the near future? Please explain your answer and provide any supporting data or references to support your argument.

Please explain your answer and provide any supporting data or references to support your argument.

Answer 1