As the dollar decreases in value, what effect does this have on the deficit?

Answer 1

None! The deficit is valued in dollars. What might change is, more stuff is exported because American products would be cheaper to buy using foreign money.
This could lower the trade deficit.
*********************************************************

Answer 2

The deficit will grow faster as the dollar's value decreases.
The bridge that cost 2 million yesterday now costs 2.1million today because the lower dollar has caused inflation. If the Gov't borrows the money to build the bridge, 2.1 million is borrowed insted of 2 million.

Answer 3

IN A NUT-SHELL......
A decrease in value encourages an increase exports, which leads to an increase in an economy's income (GDP), which leads to an increasein the demand for money to complete transactions
an increase in money demand causes an increase interest rates which increases the cost of borrowing thus increasing interest payments thus the budget deficit inreases.
the increase in demand for money also leads to an increase money borrowed, thus the deficit inreases again.

Answer 4

Normally, a country's debt is in terms of dollars. Let me give a simple example. Let say you owe someone $1. He gave you that dollar when the exchange rate in your country, (the Philippines for example) is $1=P50. When the due date for you to pay the $1 comes, the exchange rate is $1=P40. It means that you gained P10 on your debt. That also goes the other way.

Answer 5

The devaluation of the dollar will have no effect on the deficit, only in world trade.