The trade deficit is the mirror image of the required capital inflows.So why worry about these capital inflows?
A)Trade deficits automatically cause larger budget deficits.
B)Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S.government.
C)These capital inflows create debts on which interest and principal payments will have to be made in the future.
D)During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created.

Question

Quizplus · Accepted Answer

Capital inflows create debts on which interest and principal payments will have to be made in the future. This means that the country will have to allocate a portion of its future income to repay the debt, which can constrain future economic growth and investment opportunities. It is important to monitor and manage these capital inflows to ensure that the country does not become overly indebted and that future economic growth is not hindered.

The Trade Deficit Is the Mirror Image of the Required