If a country has a current account deficit, then the country must also have
A) a merchandise trade deficit.
B) a financial or capital account surplus.
C) a financial or capital account deficit.
D) an increase in its net international investment position.

Question

Quizplus · Accepted Answer

A current account deficit means that a country is importing more than it is exporting, resulting in a merchandise trade deficit. In order to finance this deficit, the country must attract foreign investment, which would lead to a financial or capital account surplus. Therefore, choice B is the correct answer, while choices A, C, and D are not necessarily true.

If a Country Has a Current Account Deficit, Then the Country