During the 1960s and 1970s, the U.S. trade balance was close to zero, but during the 1980s, the trade deficit ballooned to unprecedented levels due to:
A)an inability of U.S. companies to compete in the international market.
B)a decline in private saving that resulted from an upsurge in consumption.
C)a decline in national saving caused largely by rapidly rising government budget deficits.
D)a worldwide recession that made it difficult for American companies to sell their products abroad.

Question

Quizplus · Accepted Answer

The 1980's in the U.S. were marked by huge federal budget deficits. These deficits pushed real interest rates up, which attracted foreign financial capital and resulted in large net capital inflows and correspondingly large trade deficits.