The term "twin deficits" refers to a situation in which there exists
A)a budget deficit as well as a current account deficit.
B)a budget deficit as well as a capital account deficit.
C)a budget deficit as well as a balance of payment deficit.
D)a current account deficit as well as a capital account deficit.

Question

Quizplus · Accepted Answer

"Twin deficits" refers to a situation where both the budget deficit and current account deficit exist simultaneously. A budget deficit arises when the government is spending more than it is earning through revenues like taxes or bond issuances. A current account deficit arises when a country's imports exceed its exports or when it is paying out more money to foreign entities than it is receiving. Therefore, a twin deficit situation refers to a scenario where a country is experiencing both a budget deficit and a current account deficit.

The Term "Twin Deficits" Refers to a Situation in Which