If a country has a current account deficit, this suggests that
A) the country's spending is less than its income.
B) the country must also have a negative merchandise trade balance.
C) the country's capital/financial account must also be in a deficit position.
D) the country's saving is less than its investment.

Question

Quizplus · Accepted Answer

A current account deficit means that a country is importing more goods and services than it is exporting, which requires it to borrow from other countries or sell assets to make up the difference. This implies that the country's saving is less than its investment, as it is consuming more than it is producing. A current account deficit does not necessarily imply anything about the country's spending or income, nor does it require that the merchandise trade balance be negative or that the capital/financial account be in a deficit position.

If a Country Has a Current Account Deficit, This Suggests