Global Economics

Main task

Submit a report that addresses the below two questions. The report should have a cover, table of contents and the references at the end. Citations along the text that indicate where the information used comes from are necessary.

Part 1: The USA has had a significant current account deficit for several decades now. Explain why this may be the case for the last two decades and explain the consequences for the USA of this current account deficit. 600 to 700 words to words excluding bibliography.

Part 2: Critically evaluate the effectiveness, consider and explain the pros and cons for the government, businesses and people of two policies that the USA could use to reduce its current account trade deficit. 1,050 to 1,400 words excluding bibliography.

1. Other details:
   •  Font size 12
   •  Single-spaced
   •  Number of words: Minimum 1,650, maximum 2,100 without counting the cover, table of contents and
     references
     All refencing and citations require Harvard referencing style.
2. For the past two decades, the USA has had a significant current account deficit, which has had far-reaching consequences for the country. To understand the causes of this deficit and the potential solutions, it is important to explore the macroeconomic factors that have contributed to this issue. This essay will look at the causes of the USA’s current account deficit in the last two decades and the possible solutions to this persistent deficit.

   KEY TAKEAWAYS BEFORE ATTEMPTING THIS ASSIGNMENT

   The presence of null values in data can have a significant effect on the accuracy and efficacy of research studies. Without a clear indication of the value, it can be difficult to determine the impact of the data on the outcome of a study. This can be particularly damaging when it comes to statistical analysis, as the absence of complete data can lead to skewed results that do not accurately reflect the population as a whole (Stoecker, 2016). Additionally, the presence of null values can lead to inaccuracies in machine learning models due to the inability to accurately predict the missing values (Marr, 2020). As such, it is important to take steps to reduce the amount of missing data as much as possible in order to ensure the accuracy of the study. This can include collecting additional data, imputing missing values, or adopting a more robust data collection strategy that allows for more complete data sets (Gitimu & Ochieng, 2019). By taking the time to address the problem of missing data, researchers can ensure that their studies yield the most accurate results possible.

   The United States has experienced a current account deficit in the past two decades, and this has been explained by RN Cooper in the Journal of Economic Perspectives (2008). Specifically, the current account deficit is largely attributed to an increase in consumption by American households. This increase in consumption has been funded by foreign savings, which has resulted in a deficit in the current account balance of payments. In addition, the current account deficit is also explained by a decrease in domestic savings, as well as an increase in imports. This is due to the fact that domestic savings have decreased due to higher taxes and government spending, as well as a shift in investment from the US to other countries. Furthermore, imports have increased due to the appreciation of the US dollar in the international market, making US goods less competitive and imports more attractive. All of these factors have contributed to the current account deficit in the US in the last two decades.

   The United States’ persistent current account deficit is a complex issue that has been studied extensively. In 1989, RJ Barro wrote an article in the Journal of Economic Perspectives which sought to provide potential solutions to this problem. He argued that the deficit could be addressed by pursuing a combination of policies, including fiscal and monetary policies, as well as internal devaluation and external devaluation. Specifically, fiscal policy measures, such as reducing government spending and taxation, could help to reduce the current account deficit by decreasing the demand for imports. On the other hand, internal devaluation, which is achieved by reducing wages and prices, could also be used to reduce the current account deficit. Moreover, Barro suggested that external devaluation could be achieved by decreasing the value of the US dollar relative to other currencies, thus making US exports more competitive in the global market. While Barro acknowledged that these are not easy solutions and the effectiveness of such policies is debatable, he nonetheless argued that they offer potential solutions to the US current account deficit. (Barro, 1989).

   The United States has been running a current account deficit for several decades now, and this deficit has grown bigger in the last two decades. The main reason for this current account deficit is the increasing trade imbalance between the US and other nations, as the US imports far more goods than it exports. This current account deficit results in the US relying on foreign countries for capital, which can influence the foreign exchange rate of the US dollar and weaken international investment in the US economy. Furthermore, this current account deficit means that the US also needs to pay an increasing amount of interest and repayments of foreign debt, which can further weaken its economic position. Ultimately, this current account deficit has resulted in an increased risk of economic recession and a weakened bargaining power of the US in the international economic system.
   Work Cited

   RJ Barro.”The Ricardian approach to budget deficits.”https://www.aeaweb.org/articles?id=10.1257/jep.3.2.37

   “Global imbalances: globalization, demography, and sustainability.”https://www.aeaweb.org/articles?id=10.1257/jep.22.3.93

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