If there is a trade deficit,which of the following is true?

Question

Quizplus · Accepted Answer

A trade deficit refers to the situation where a country imports more than it exports. This means that there is a negative balance of trade. However, the current account balance is not solely dependent on trade. It also includes income received from investments abroad, among other things. Therefore, the current account balance could still be positive, negative, or zero. Option B and C are not correct because a trade deficit does not necessarily imply a current account deficit or surplus. Option D is incorrect because a financial account surplus refers to the net inflow of capital into the country, which is a separate concept from the trade deficit.

If There Is a Trade Deficit,which of the Following Is