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Chapter 8: Problem 17

Since the passage of NAFTA our trade deficit with Mexico has gone and our trade deficit with Canada has gone (LO7) a) up, up c) up, down b) down, down d) down, up

Short Answer

Expert verified
a) up, up

Step by step solution

01

Evaluating the impact of NAFTA on US trade deficit with Mexico

The North American Free Trade Agreement (NAFTA) was implemented in 1994, with the intent to encourage economic growth and trade between the United States, Mexico, and Canada. After the implementation of NAFTA, US imports from Mexico increased significantly, as well as US exports to Mexico. However, the growth of US imports from Mexico exceeded that of US exports to Mexico, resulting in an overall increase of the trade deficit with Mexico.
02

Evaluating the impact of NAFTA on US trade deficit with Canada

Similar to the case with Mexico, the implementation of NAFTA led to an increase in trade between the United States and Canada. While both imports from and exports to Canada increased, the growth of imports exceeded that of exports. This caused the US trade deficit with Canada to increase.
03

Analyzing the answer choices

Based on the above evaluation of the impact of NAFTA on US trade deficits with Mexico and Canada, we can analyze the answer choices provided: a) up, up: The trade deficits with both Mexico and Canada increased after NAFTA. b) down, down: The trade deficits with both Mexico and Canada decreased after NAFTA. c) up, down: The trade deficit with Mexico increased, while the trade deficit with Canada decreased after NAFTA. d) down, up: The trade deficit with Mexico decreased, while the trade deficit with Canada increased after NAFTA. Given the findings in our evaluations, the correct answer is: a) up, up - Since the passage of NAFTA, the trade deficit with both Mexico and Canada has increased.

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