Question

Explain in your own words why there is likely to be a relationship between federal budget deficits and U.S. international trade deficits.

Short answer

Federal budget deficits increases and decreaseand the U.S. international trade deficits increases and decreases respectively.

Step-by-step solution

Introduction

A rise in the federal budget deficit in a year infers an expansion in the getting necessity of the federal government.

Explanation

Whenever the public authority's interest for reserves rises, it pushes the loan costs in the nation up. As homegrown financing costs rise, outsiders track down putting resources into the U.S. more appealing. Thus, unfamiliar financial backers request more dollars. The developing interest in the dollar prompts dollar appreciation. Thus, commodities of merchandise decline and imports of products ascend in the U.S. Consequently, the U.S. import/export imbalance rises.