1 Answers

What are the effects of recession in the following situation?

My question doesn’t necessarily concern any real life state, I just want to know what would generically happen in the following situation:

Nation A has a huge trade deficit. However, it’s overall economy is strong, having a very strong national currency, huge GDP, etc.

Nation’s X, Y, and Z (Nation A’s biggest trading partners and primary reason for Nation A’s trade deficit) all suddenly fall into a deep recession.

What is the immediate and long term effects on Nation A’s economy?

pobms2000 on Oct 02, 2010

For nation A- a recession would likely not harm the internal economy since it has a large GDP. What might happen is that the demand for A’s currency might decrease rendering Nation A’s goods cheaper in the world economy, which could help the trade deficit.

Nation X Y Z might have no capital to buy A’s goods even though they are cheaper.

This is a universal recession where the woes of one country end up hurting the other, and it becomes a perpetual cycle