To Finance This Trade Deficit, The U.s.

Domestic Inflation Reflects Domestic Monetary Policy.

Increased Government Spending Can Provide A Temporary Stimulus To Demand And Output But In The Longer Run Higher Levels Of Government Spending Crowd Out Private Investment Or Require Higher Taxes That Weaken Growth By Reducing Incentives To Save, Invest, Innovate, And Work.

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.

We Pay Some Price When Necessary To Bring Down Inflation But That Price Is Temporary And Is Not Large Relative To The Permanent Gain From Reduced Inflation.

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