If a country uses trade deficits to finance consumption, then the country will experience:

Question

Quizplus · Accepted Answer

When a country uses trade deficits to finance consumption, it means that the country is importing more goods and services than it is exporting, which creates a negative balance of trade. This can lead to a decrease in the portion of GDP that is invested in capital deepening, as the funds are being used to finance consumption instead. Over time, this can also lead to a decline in real GDP per capita as a result of the lack of investment in capital deepening. Additionally, there will be no capital deepening as the funds are being used to finance consumption rather than investment. Therefore, all of the above choices are correct.

If a Country Uses Trade Deficits to Finance Consumption, Then