can increase spending (deficits increase savings). If that demand is met by foreign supply (because the price does not adjust) the increase in production capabilities is met in the foreign nation. If production capabilities are not local then the GDP growth does not occur (or is muted as sales services and transportation are the only beneficiaries). In addition, if the expectation is that demand will be met by foreign supply, then there is no investment in production facilities in the US economy. b.To maintain local GDP growth and employement, the local nation must maintain an exchange rate that undervalues the local currency, which works like a negative tax. i.If a US state paid manufacturers a negative sales tax (or waived property taxes) to produce goods that were sold outside the state, it would attract local production at the expense of production in other states (see auto manaufactuing in the US). The problem is that we don't have across the board floating rates. China pegs to the dollar so there is not a corresponding adjustment, for example. Within the EZ, there are disproportionate flows among EZ countries that are no longer addressed by the exchange rate since all the EZ countries share the same currency. This is creating severe imbalances in the global economy that would in principle be corrected by floating exchange rates. MMT has ad hoc solutions for these imbalances that are regularly discussed on this and other MMT blogs, but the more efficient way would be to have