In the 1980s, the U.S.current account deficit was financed by:
A)large outflows of domestic capital to other countries.
B)large inflows of capital from private foreign investment in the United States.
C)loans made by U.S.residents to the government.
D)large inflows of foreign government capital.
E)the Tax Reform Act of 1986, which increased income taxes for the wealthy.

Question

Quizplus · Accepted Answer

In the 1980s, the U.S. current account deficit was financed by large inflows of capital from private foreign investment in the United States. This means that foreign investors were investing in the U.S. economy, which helped finance the deficit. This was mainly due to the high interest rates being offered in the U.S. at the time, making it an attractive destination for foreign investment.