Archive for the ‘Little Book of Economics’ Category
Budget deficit vs current account deficit
A reader of “The Little Book of Economics” asks the following :
“All else equal, does a larger budget deficit imply a larger current account deficit?”
Chapter 7 of my book (“All the world’s an ATM”) notes that when a country spends more than it earns, it must borrow the difference from abroad, or sell foreigners some assets. This produces a current account deficit. Here, I’ll explain how domestic behavior produces a current account deficit. Read the rest of this entry »