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That's exactly it -- if the price of imports goes up, the volume of imports should fall and the volume of exports should rise, and the US current account deficit with China and the rest of the world should reach equilibrium. In other words, in the long term prices clear markets. Of course in the short term that's not true and higher import prices actually increase the deficit until consumers adjust their demand.
May 15 12:12 pm
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All Comments by Frank Li »Riddle: What Currency Is Warren Buffett Buying? [View article]