\"Fresh signs of a global slump threaten to slow U.S. economic growth in 2015. D
ID: 1117355 • Letter: #
Question
"Fresh signs of a global slump threaten to slow U.S. economic growth in 2015. Declining inflation rates in Japan and the Euro-zone, along with faltering growth rates in India and Brazil, all point to weakening future demand for U.S. products. The actions of these countries' central banks will likely depreciate their currencies, hurting U.S. export growth further.
The low-growth outlook is raising questions over whether weak demand could wash onto U.S. shores in the coming months, even as American businesses and consumers benefit from falling gasoline prices heading into the holiday shopping season. America’s economy has grown steadily this year.
Cheaper energy stands to boost both the U.S. economy and those of other oil importers, including China, by offering what amounts to a tax cut to businesses and consumers." The Wall Street Journal
A. Has the U.S. economy been affected yet by slowing economic growth abroad? Carefully explain how the drop in economic growth rates in foreign countries may directly affect components of U.S. GDP.
B. Explain how monetary policy actions in countries experiencing these slowdowns in economic growth may affect U.S. exchange rates and capital flows.
C. Consider your answers to the previous two questions. Does they suggest that countries' business cycles have become more synchronized due to increased capital and goods flows? Briefly explain.
Explanation / Answer
A. The countries which are significant trading partners of US are showing slow growth rates such as that of China. It is surle impact the ecinomy of United States. It is one of the world's largest exporting country. With decrease in demand in other countries the demand for AMerican goods also decline this result in decrease in export and hence decrease in GDP of US as well.
B. Countries with slow econmic growth could adopt exapnsionary monetary policy. To which the aggregate demad could be pulled up. WIth such increase in demand in other countries because of monetary policies the demand for imports will also rise hence demand for American goods will also rise. With increase on demand for American goods the demand for American dollar will rise leading to appreciation in dollar. This appreciation will make investment higher faciliatating more nd capital flow in United States.
C.Yes, increased capital flow and goods flow have made economies interdependent and interlinked. Despite having a hige domestic market a substantial portion of US gdp comes from export that largely depends upon performance of its trading partner.
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