1. Discuss Secretary Snow’s statement that the deficit could be improved if other industrialized trading partners’ economies were growing faster.

Secretary Snow’s statement relates to the expectation that if other countries were growing and prosperous, they would create a source of aggregate demand for U.S. products. Growing countries would have more to spend and some of that spending would likely go for American made products. Currently, the U.S. spending on foreign goods is increasing aggregate demand in foreign countries at the expense of similar amounts being spent in America.

2. How does the expanding trade deficit threaten to hamper U.S. growth?

Questions 1 and 2 are closely related. The fact that the trade gap is widening indicates more dollars are flowing out of the American economy than are flowing in. As stated in the article, imports are about 60 percent higher than exports, so to correct the imbalance the U.S. would need to cut imports or increase exports. As long as the deficit continues to expand, it indicates that U.S. aggregate demand will not grow as much as it would if America was experiencing a decreasing trade deficit.

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