Assignment No.

2
Course title:
Macro Economics
Topic:
Case study
Submitted to:
Mam Mariam Amjad
Submitted by:
Abdul Rehman
Registration no:
19-arid-271
Read the case study and answer these following questions

Question no.1
What is trade deficit?
Definition: The mount by which is the cost of a country import exceeded the
value of its exports.
Example. If the value of the imported items to the United State equaled $1 trillion
last year, but the value of the exported items to the United State equaled $750
billion, then the United State would have a negative $250 billion BOP, or a$250
billion is a trade deficit.
It's one way of measuring international trade, and it's also called a
negative balance of trade. You can calculate a trade deficit by subtracting
the total value of a country's exports from the total value of its imports.
Question no.2
What causes the U.S trade deficit?
The failure of the U.S. trade deficit to show marked improvement after
two years of a falling dollar has become a major source of strain in the
politics of economic policy. Frustrated with the persistence of the trade
deficit, the administration has demanded reflation by unwilling German
and Japanese governments. The major cause of u.s trade deficit is borrows
from abroad and trade deficit is occurs when a country does not produce
everything it needs and borrows from foreign states to pay for the imports.
Question no.3
What is policies responsible for the trade deficit?
Ans; A trade deficit occurs when a country does not produce everything it
needs and borrows from foreign states to pay for the imports. That's called
the current account deficit.2
A trade deficit also occurs when companies manufacture goods in other
countries. The raw materials for manufacturing that are shipped overseas
for factory production count as an export. The finished manufactured goods
are counted as imports when they're shipped back to the country. The
imports are subtracted from the country's gross domestic product even
though the earnings may benefit the company's stock price, and the taxes
may increase the country's revenue stream.
Question no.4
Is the trade deficit a problem?
Ans;.The effects of trade deficit are following:

Initially, a trade deficit is not necessarily a bad thing. It can raise a

country's standard of living because residents can access a wider variety of
goods and services for a more competitive price. 4 It can also reduce the
threat of inflation since it creates lower prices. 5
Over time, a trade deficit can cause more outsourcing of jobs to other
countries. As a country imports more goods than it buys domestically, then
the home country may create fewer jobs in certain industries. At the same
time, foreign companies will likely hire new workers to keep up with
the demand for their exports.