The U.S. trade deficit is most likely to be harmful in the future if:
A)U.S. citizens continue to accumulate foreign assets.
B)U.S. production continues to exceed U.S. consumption.
C)the inflow of financial capital associated with the current deficit does not finance productive investment.
D)U.S. citizens refuse to lend to foreigners as a result of it.

Question

Quizplus · Accepted Answer

The U.S. trade deficit could be harmful if the inflow of financial capital does not finance productive investment. This is because, without productive investment, the economy may not generate sufficient returns to offset the liabilities created by the deficit, potentially leading to economic problems.

The US Trade Deficit Is Most Likely to Be Harmful in in the Future