When Australia has a current account deficit, we know that it is also:
A) running a capital account deficit.
B) running a balanced trade account.
C) lending to the rest of the world.
D) borrowing from the rest of the world.
E) suffering from positive investment income.

Question

Quizplus · Accepted Answer

A current account deficit means that a country is importing more goods and services than it is exporting, which leads to a net outflow of money. To finance this deficit, the country must borrow from the rest of the world, resulting in a capital account deficit. Therefore, the correct choice is D) borrowing from the rest of the world.

When Australia Has a Current Account Deficit, We Know That