Read the article “Five Reasons Why the Focus on Trade Deficits Is Misleading” by Robert Lawrence, published in 2017 by Peterson Institute for International Economics.
Briefly describe the five misconceptions about trade deficits the author describes. In doing so, consider answering the following questions:
If a country has a positive trade deficit (i.e. negative net exports), which must be larger, national saving or national investment?
What are some main factors that determine national savings and investment (and therefore the trade deficit)?
What drives the correlation observed in Figure 2?
Why is a monetary economy better than a barter economy? How does this relate to bilateral trade balance (difference between the values of exports to and imports from a specific country)?