The U.S.trade deficits of the 1980s and 1990s may represent a problem because they will require
A)higher consumption in the future in order to increase imports.
B)lower consumption in the future in order to repay interest and principal to foreigners.
C)lower consumption in the future in order to finance increased investment.
D)higher budget deficits in the future in order to increase the trade surplus.

Question

Quizplus · Accepted Answer

The trade deficits of the 1980s and 1990s means that the US was importing more than they were exporting, resulting in a negative balance of payments. This means that the US is owing money to foreign countries to finance these imports. In order to repay the interest and principal to these foreign countries, the US will need to lower consumption in the future. This will be necessary to reduce the amount of money owed and to stabilize the economy. Therefore, B is the best choice.

The UStrade Deficits of the 1980s and 1990s May Represent a a Problem