Suppose that in the data, the trade deficit appears to be procyclical ( take this as a statement of fact).

2. (4 points) Define what is meant by: (i) a country running a trade deficit; (ii) the trade deficit exhibiting procyclical behavior.

3. (4 points) Using one of the open economy models studies in class, use a diagram to outline a possible explanation for the procyclical behavior of the trade deficit. Please upload your diagram here. Acceptable file types include: jpeg, jpg, png and pdf.

4. (2 points) Provide a brief explanation to accompany your diagram that you uploaded in question 3 above to detail the mechanism by which we are able to obtain a procyclical trade deficit.