When a country has a current account deficit,the country
A) is borrowing from abroad.
B) is lending abroad.
C) must have a government budget surplus.
D) must have a government budget deficit.

Question

Quizplus · Accepted Answer

When a country has a current account deficit, it means that the country is spending more on imports and other foreign expenditures than it is earning through exports and other sources of income. To finance this deficit, the country has to borrow from abroad, which will increase its overall level of indebtedness to foreign lenders. Therefore, choice A is the correct answer. Choices B, C, and D are incorrect because they do not accurately reflect the implications of a current account deficit.

When a Country Has a Current Account Deficit,the Country