Why Should a Large Trade Deficit Not Necessarily Be a Cause

question 116

Essay

Why should a large trade deficit not necessarily be a cause for concern for an economy?

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Definitions:

Working Capital Decision

Decisions that relate to managing the short-term assets and liabilities of a company, crucial for maintaining its operations and liquidity.

Capital Budgeting

The process used by companies to evaluate and select long-term investments that are likely to help achieve their financial goals.

Investment

Designating financial means with the prospect of attaining profit or income.

Capital Intensity Ratio

A financial metric that compares a company's total assets to its sales revenue, used to evaluate how much capital is needed to generate sales.