If a nation is experiencing an inflow of capital and a balance of trade deficit, this is a problem if

Question

Quizplus · Accepted Answer

A balance of trade deficit means that the country is importing more goods and services than it is exporting, which can be a problem for the economy. If the capital inflow is channeled into unproductive projects, it may not address the root cause of the balance of trade deficit and could lead to a further weakening of the economy. On the other hand, if the capital inflow is channeled into productive projects, it could help to address the balance of trade deficit by boosting exports and reducing imports. The country's rate of unemployment and investment rate are not necessarily related to the issue at hand.

If a Nation Is Experiencing an Inflow of Capital and a Balance