Present consumption supported by large trade deﬁcits may come at the expense of

Question

Quizplus · Accepted Answer

Large trade deficits can result in permanent debt to foreign interests, as the U.S. must borrow in order to finance the deficit. Additionally, the deficits can lead to permanent foreign ownership of formerly U.S.-owned assets as foreign investors purchase U.S. assets to help finance the deficit. Finally, large sacrifices of future consumption may be necessary to pay off the debt or alleviate the trade deficit. Therefore, all of these options could be true.

Present Consumption Supported by Large Trade Deﬁcits May Come at the Expense