Economic Analysis

Trade has always been a driving force between nations. The exchange of goods and services allows for a specific country to manufacture and produce those goods it can create the most efficiently and inexpensively. Because a country does not have to be locked to its own resources through trade, it can consume more than it is able to produce from its own resources. Trade between nations also creates larger markets for goods and services than just the domestic one. In today’s world, the high degree of international trade has made countries interdependent on one another where their own domestic economies are concerned. The U.S. is in no different in this aspect. This fall the trade deficit was listed at its highest since new methods of calculating it were introduced by the Commerce Department in 1992, “Consensus forecasts projected the goods-and-services trade deficit would rise from an unrevised $13.9 billion in July to $15 billion in August. In fact, the August deficit was $16.8 billion” (Context 1).

The problem for the American economy where the trade deficit is concerned is that it means Americans are consuming many more imported goods and services than they are exporting. There is a twofold explanation for this situation. The first key to the situation is the fact that many markets that are heavy buyers of Americ

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the ability to control the cost of money through manipulation of the long-term borrowing interest rate. One of the biggest economic factors that makes experts worry about inflation growing is the employment level. When unemployment is very low, as it has been in the U.S. for the past five years, worries of inflation begin to grow. This often prompts the Chairman of the Federal Reserve, Alan Greenspan, to tighten monetary policy in an effort to keep inflation levels low. This article suggests that despite tight labor markets the typical worries and reactions that occur regarding inflation are not materializing, “Despite the tight labor markets, there are not any large inflationary pressures in the present period,” said the president of the Federal Reserve Bank in Atlanta, adding, “he was glad in retrospect that the Fed didn’t tighten monetary policy when the unemployment rate reached a point where some thought it would spark inflation” (Fed Officials 1). However, when labor markets are tight, traditionally inflation seems to rise and so does the resulting drop in consumer confidence. This occurs because people are unable to buy products and services from high costs and wages that do not keep pace with the rising cost of liv
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Approximate Word count = 1767
Approximate Pages = 7 (250 words per page)

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