Create a 8 pages page paper that discusses international money and finance balances. The current account deficit is primarily the consequence of decisions made by the private sector. Since the current account deficit is considered temporary, it can easily be financed. hence there is no need to be overly concerned. This paper will examine the current account deficit, providing evidence of how the private sector is largely to blame and describing why it is mainly noting to worry about.
A critical explanation for the increase in the current account deficit in the US is the increasing levels of productivity, which resulted in a pronounced investment boom. The accelerating productivity inherent in US workers compared to that of workers in other countries is a prominent cause of the rise in the current account deficit. For instance, productivity in the US grew by at least 4.8% per year in the manufacturing sector (Warnock & Freund 2007, 149). In the year 1999, the US manufacturing sector experienced a 6.4% rise in productivity. This essentially meant that productivity grew quite substantially between the year 1980 and 1999. This surge in productivity resulted in an investment boom. Since the year 1991, gross private domestic investment as a share of the US GDP has increased quite substantially, achieving a post-war high of 18.3% in early years of the 21st century (de Mello, Padoan & Rousová 2011, 18). This increased investment rate was primarily in response to the dramatic changes encountered in the US technological climate, which underpinned the increase in productivity. This is primarily because technological advances have allowed a vast majority of US firms to project productivity to increase momentously. Increased growth in productivity increased the economy’s capacity to produce products and services. The rise in plausible supply translates, over time, into a rise in the real quantity of products and services produced by the economy.