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Inflation Is Lower And More Stable And The Real Business Cycle Fluctuations Are More Modest.

Although Economists Have Studied The Sensitivity Of Import And Export Volumes To Changes In The Exchange Rate, There Is Still Much Uncertainty About Just How Much The Dollar Must Change To Bring About Any Given Reduction In Our Trade Deficit.

But Because We In The United States Finance Our Current Account Deficit By Borrowing In Our Own Currency, We Can Move To A More Competitive Dollar Without The Adverse Effects That Followed Currency Declines In Other Countries.

A Second Reason Why Science Cannot Replace Judgement Is The Behavior Of Financial Markets.

To Finance This Trade Deficit, The U.s. Has To Borrow From The Rest Of The World Or Sell American Assets Like Stocks, Businesses, And Real Estate To The Rest Of The World.