Macroeconomics Discuss Within Your Learning Team How

¶ … Macroeconomics Discuss within your Learning Team how and why the U.S.'s deficit, surplus and debt have an effect on the following: The United States' financial reputation on an international level The United States' fiscal position will have an impact on confidence. This is because the underlying levels of the trade deficit, surplus and the debt will affect consumers and businesses perceptions of the future. When this happens, there will be changes in the overall amounts of economic activity that are occurring.

(Masters, 2012) For example, after the end of World War II, America's debt levels were at 122% of GDP spending. The tremendous amounts of exports overseas (between: 1946 to 1976) set the stage for the country to realize massive trade surpluses. This caused the national debt to decrease from 122% to 40%. During this time, the U.S. became the most dominant economic power in the world.

(Masters, 2012) Evidence of this can be seen with observations from the Council on Foreign Relations which observed, "The national debt peaked in 1946 at 122% of GDP, exceeding the total output of the U.S. economy. For the next thirty years, a long period of economic growth gradually brought the debt down as a percentage of GDP despite wars in Vietnam and Korea and the establishment of two federal entitlement programs, Medicare and Medicaid.

In their first year (FY 1967), spending for both programs amounted to just 0.5% of GDP." (Masters, 2012) This is illustrating how the large budget surpluses improved America's financial reputation on the international level. Once this occurred, is when there was an increase in the standard of living for most people inside the United States. It is at this point that other countries began to work closely with the U.S. In order to realize similar benefits for themselves.

This helped to transform nations which were once former enemies into key allies (i.e. Japan and West Germany). (Masters, 2012) Moreover, large budget deficits will have a negative impact on America's fiscal position and its reputation within the international community. For instance, from the early 1980's until today these levels have been skyrocketing with them reaching 80% by 2011. These rises became more pronounced after the September 11th terrorist attacks and the TARP programs from the financial collapse of 2008.

(Masters, 2012) According to Amadeo (2012) this can provide short-term stimulus to help encourage economic growth. This is from the increased amounts of government spending which are resulting in improved economic activity. These transformations are supporting key industries (such as: defense) which helps to boost assistance to a variety of sectors. (Amadeo, 2012) However, over the long-term, these levels can become problematic as this will lead to higher interests rates and taxes. This occurs when investors will become nervous about the government's ability to pay them back.

When this happens, they will demand more for loaning them their.