Unless The Trade Deficit Shrinks, The Combination

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

First, I Think The Science Of Monetary Economics Has Clearly Gotten Better.

Thirty Years Ago, Many Economists Argued That Inflation Was A Kind Of Minor Inconvenience And That The Cost Of Reducing Inflation Was Too High A Price To Pay. No One Would Make Those Arguments Today.

The Only Way That We Can Reduce Our Financial Dependence On The Inflow Of Funds From The Rest Of The World Is To Reduce Our Trade Deficit.

Although Economists Have Studied The Sensitivity Of Import And Export Volumes To Changes In The Exchange Rate, There Is Still Much Uncertainty About Just How Much The Dollar Must Change To Bring About Any Given Reduction In Our Trade Deficit.