Economics 102 Mathematics & Economics Essay Research

Economics 102
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Economics 102
Answer 1
In his article "Will Economic Illiteracy Trigger a Trade War," Jeffrey Sachs asserts that "Nearly 100 days after US President Donald Trump took office, he and his commerce secretary, Wilbur Ross, continue to commit an economic fallacy that first-year economics students learn to avoid" (Sachs, 2017). At this point, the economic fallacy is the perception that the country's current-account deficit is caused by the unfair trade practices caused by China and Germany. The American trade deficit occurs due to the falling and low rate of saving. In particular, President Trump's thoughts that other countries are responsible for its trade deficit is a fallacy because he has not put other factors into consideration. Notably, a trade deficit is experienced when a country's value of imports is more than its exports. As such, it appears as if President Trump has assumed that the high rate of imports from China and Germany is responsible for the low rate of savings, which is an economic fallacy. Specifically, President Trump tried increasing the tax for all imports from China, which was a strategy that was meant to reduce the current-account deficit. However, he did not understand that imposing trade barriers would lead to first-order effects on America's investment and saving rates (Sachs, 2017). If President Trump had good economic advisors, he should understand that the best way to reduce a trade deficit is to increase the savings or decrease investments in the economy. People might believe in President Trump's economic fallacy since the rate of imports, particularly from China, has increased. For example, Americans have realized that electronic products from China are affordable and high-quality. For this reason, they have started to neglect buying home-made dev...