1. Define a trade deficit. Contrast the trade deficit with the U.S. budget deficit. Which, in your mind, is more important or potentially damaging to the U.S.?

A trade deficit is defined as the dollar amount by which the value of a nation's imports of goods and services exceeds the value of its exported goods and services. A budget deficit, on the other hand, is the amount of spending by the government above and beyond the revenue they take in. Those students saying the trade deficit is most harmful will probably argue that it might result in the world using a different currency standard than the dollar-like the euro. Further, continuing trade deficits could lead to American job losses and even potential recession. Those arguing that the budget deficit is most harmful will likely say we should consume within our means, and stop passing the burden of our consumption on to future generations. Further, since many foreign governments and foreign companies buy the U.S. Treasury securities that finance the budget deficit, foreigners may well end up owning American assets-which could become a problem. In the end, the important factor on either issue relates to how big either the trade deficit or the budget deficit is in relation to the entire output of an economy.

2. The article suggested that imports from China are a large part of the deficit. Use any source available to determining the trade deficit between the U.S. and China during August of 2006.

A search on Google will reveal various sources for this information. One such source is http://www.minneapolisfed.org/pubs/region/99-03/stern.cfm . Visit this site and you will find the information listed by years. Simply select the year you want and the data will be displayed by month.

Multiple Choice/True False Questions