ABSTRACT
This chapter shows that the aim of the different adjustment alternatives analyzed is to improve the US balance of payments by about $5 billion. It suggests that the United States seeks primarily to improve its current account, especially its trade balance, since such a structural objective has clearly been present in recent policy steps and in the payments policies of most of the other industrialized countries as well. The chapter discusses slowing of growth undertaken solely for balance-of-payments reasons and beyond that "needed" by the domestic economy. The policy mix approach would also carry several costs related specifically to the key currency role of the dollar. Basing US fiscal policy on the balance of payments would represent as drastic a violation of the "aloofness" criterion required for a key currency as would straight deflation. The final adjustment option for the United States is exchange-rate changes.
