The increase in the trade deficit in the 1980's reflected a decrease in national saving that is associated with an increase in the government budget deficit.

Question

Quizplus · Accepted Answer

The increase in the trade deficit during the 1980s was indeed associated with a decrease in national saving, which was partly due to an increase in the government budget deficit. When the government spends more than it collects in taxes, it borrows from the private sector or from foreign entities, which can reduce the amount of savings available for investment. This decrease in national saving can lead to a higher trade deficit as the country imports more than it exports.

The Increase in the Trade Deficit in the 1980's Reflected