Chapter 12 National Income Accounting and The Balance of Payments.pptVIP

Thirdly, governments may also increase taxes This would either reduce budget deficit or produce a surplus X-M = S + (T-G) - I Increasing taxes would either reduce government borrowing or reduce previous debt. Same effect as an increase in savings GDP AND THE TRADE BALANCE Fourthly, governments may change their spending Reducing G reduces the trade deficit, further raising taxes: potentially more effective than either policy used in isolation GDP AND THE TRADE BALANCE GDP AND THE TRADE BALANCE Table 12.2 Potential Adjustment to Reduce Trade Imbalances Country Has a Trade Deficit Surplus Inc