ECON545 Week-5 Discussion 1

One major cause of the US trade deficits is the labor rate and what is made domestically. For example, if Nike has to pay an employee $7.25 an hour to produce $150 dollars Jordans, however that same company can go to Taiwan and pay a worker $3.50 an hour to produce the same $150 dollars shoes, tap into an untapped market, receive lower taxes, and less or no environmental regulations. Since New Balance has to pay twice the rate per worker for shoes created - this affects the amount made domestically for New Balance to the amount of Jordans produced and sought for as an import. The trade deficit is in short when the US takes in more than it puts out. Just as a family with a combine income of $50000 may be able to purchase items totaling $80000. It would be unwise as the family would be in debt for 30000. Likewise, producing goods that total 180Million but receiving (importing) good that total 210Million means the US is in debt 30Million...continuing this year after year and debt can add up tremendously.

a benefit of trade deficits is that more products  can be produced at a lower rate. a major cost of trade deficits is that the country's debt continues

 
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