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The equation SP = I + CA - $9 = I + CA -(T - G) = I + CA + (G - T) tells us that to reduce a current account deficit, a country must increase its private saving, reduce domestic investment or cut its government budget deficit. Nowadays, some people recommend restrictions on imports from China (and other countries) to reduce the American current account deficit. How would higher U.S. barriers to imports affect its private saving, domestic investment and government deficit? Do you agree that import restrictions would necessarily reduce a U.S. current account deficit?
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Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.
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