Principles of Macroeconomics / Unit 15 MAC 1409 short lesson, about 20 seconds
From Budget Deficit to Trade Deficit
Captions available
The idea
A budget deficit raises aggregate demand, and some of that spending buys imports. Foreigners accumulate the currency and invest it back, which finances the deficit. So a trade deficit often accompanies a budget deficit.
In practice
The money that leaves as payment for imports returns as purchases of assets.
Where people slip
This is the third term of the identity moving, not a separate phenomenon.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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