s are, but rather of the gap between how much we save and how much weinvest. In todays economy, private savings remain low and corporate investment hasincreased tremendously. These investments have to be financed in some way, usually inthe form of a loan from someone elses savings. (foreign money). 9A second factor that can be examined is the fact that the activity of exchange rates andinterest rates in other countries can affect U.S. exports and imports. In Asia, during theircurrency crisis, their currencies sank and interest rates rose. Investors become cautious,and choose to invest in safer economies, such as that found in the U.S. As Asian currencybecomes further devalued, the dollar becomes stronger and imports are less expensive,creating a desire to buy U.S. imports. This can cause a rise in the trade deficit. However,a closer examination of the deficit reveals that although the deficit is indeed higher, thegap in imports and exports is largely due to an export drop, rather than an import surge. Negative Impacts of the Trade DeficitBenefits of the trade deficit can be found, and the thought that a large trade deficit is aproblem is not entirely correct, there are also valid reasons as to why the trade deficit isnot entirely beneficial. The Organization for Economic Cooperation and Development estimates that by the year2000 the U.S. trade deficit will grow to almost $200 billion. One of the principaldisadvantages of the deficit is that the deficit is often blamed for loss of jobs. In 1996, $1Billion value added to U.S. manufacturing cost 14,000 jobs nationwide. Also, the tradedeficit supposedly leads to greater international liabilities. As the U.S. funds their savingwith foreign money, they become more reliant on those countries.VI. DIFFERENT EXCHANGE RATE SYSTEMSAnalyzing the Cost of Similar Goods in Foreign MarketsThere are quite a few variables that can be analyzed when looking at the cost of goods inforeign markets. ...
