Suppose that there are two countries, X and Y, both of which have experienced trade deficits for

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Suppose that there are two countries, X and Y, both of which have experienced trade deficits for a few years. To finance trade deficits, the countries have to borrow foreign funds, but their fund uses are quite different from each other. Country X spends most of the borrowed funds for consumption while country Y invests the borrowed funds. Given this information, suggest one possible benefit and cost of trade deficit for the two countries.

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Macroeconomics

ISBN: 9780367752279

Global Edition

Authors: Acemoglu Daron, Laibson David, List John.

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