Case Code : CLIBE056
Publication date : 2005
Subject : Business Environment
Length : 04 Pages
Short Case Study Price: INR 100;
The caselet explains the reasons for current account deficit (CAD) in the US economy. It also explains the effect of US CAD on different economies of the world. The caselet also discusses the measures that need to be taken by an economy to maintain international trade balance.
Questions for Discussion:
1. The US had been facing a current account deficit (CAD) since the beginning of the 1970s and the deficit has increased tremendously since 2000. Briefly discuss the reasons for the CAD in US and the significant increase in CAD after 2000.
2. Asian central banks have invested huge amounts in US Treasury bonds and these banks face numerous problems because of these investments. Briefly discuss the problems faced by the central banks that had financed the huge US CAD. Suggest some measures that they could take to avoid or reduce their risk.
Current Account Deficit (CAD), Gross Domestic Product (GDP), Foreign Direct Investment (FDI), globalization, outsourcing, trade deficit, Net International Investment Position (NIIP), Federal Reserve, Inflation, United Nations, European Central Bank (ECB).
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