quick CAD help (1 Viewer)

[sunjet]

why is it a restraint on eco growth and outline some impacts it has on the economy.

 

[nick1048]

A large CAD is a restriction on economic growth because economies and speculators start becoming suspicious as to the "integrity" of the economy and will perhaps withdraw their funds. Without these funds (and a lack of public savings) there is no capital to fund economic growth and this puts a cap on how much economic growth an economy can experience. This also has an impact when it comes to obtaining assistance from other economies and obtaining trade partners. No one wants to associate with an economy with dangerously high CADs (see Asian Financial Crisis)

 

[know_it_all]

also CADs are considered 'speed limits' on e/growth
in times of high growth...demand for M increases--> worsening the CAD