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The Complete Idiot's Guide to Economics, 2nd Edition by Tom Gorman

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Trade Deficits: Bad or Good?

As usual in economics, there are several different views of trade deficits. Depending on who you talk to, they are bad, good, both (depending on the situation), or immaterial. However, few economists argue that trade deficits are always good.
Economists who consider trade deficits to be bad believe that a nation that consistently runs a current-account deficit is borrowing from abroad or selling off capital assets—long-term assets—to finance current purchases of goods and services. They believe that continual borrowing is not a viable long-term strategy and that selling long-term assets to finance current consumption undermines future production. (If this reminds you of the discussion about federal budget deficits ...

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