Asked by Cradeaja Clary on Jul 16, 2024
Verified
One of the consequences of the U.S. trade deficit is that
A) domestic inflation has resulted.
B) the accumulation of American dollars in foreign hands has enabled foreign firms to build factories in America.
C) the distribution of income in the United States has become less unequal.
D) the system of flexible exchange rates has been abandoned in favor of a new gold standard.
Trade Deficit
A situation where a country's imports exceed its exports over a certain period, indicating that it is importing more goods and services than it is exporting.
Foreign Hands
Refers to the involvement or ownership by individuals, companies, or governments from other countries.
American Dollars
refer to the currency of the United States, used as the primary form of money in the country and a major global reserve currency.
- Investigate how a nation's economy is affected by the presence of trade deficits and surpluses.
Verified Answer
MP
Mukesh PareekJul 19, 2024
Final Answer :
B
Explanation :
The accumulation of American dollars in foreign hands due to the U.S. trade deficit allows those foreign entities to invest in the United States, including building factories. This is because when the U.S. imports more than it exports, dollars flow out of the country to pay for these goods, and these dollars can then be used by foreign firms for investment in the U.S. economy.
Learning Objectives
- Investigate how a nation's economy is affected by the presence of trade deficits and surpluses.