Question

Identify the causes and consequences of recent U.S trade deficits.

Answer 1

Cause:

trade deficit

1) the sharp rise in the value of the or appreciation in dollar,  caused the prices of U.S. goods to rise compared to the prices of foreign goods

(2) the strong U.S. economic recovery after financial crisis caused U.S. consumption of goods, including imports, to rise

Consequences:

1) it increase national debt in long term  

2)It may created inflation and may persistent in long term too.

3) it may decrease us competitiveness with respect to trade surplus country like china ,which may decrease investors destination towards china.