Borrowing from other nations is necessary to finance

Question

Quizplus · Accepted Answer

When a country imports more than it exports, it creates a trade deficit. To finance this deficit, it needs to borrow from other nations. Therefore, option A is the correct answer. Option B is incorrect because a trade surplus means a country is exporting more than it imports, so it doesn't need to borrow from other nations. Option C is incorrect because a foreign trade surplus means the same thing as option B. Option D is incorrect because a surplus in the current account may or may not mean that a country needs to borrow from other nations - it depends on other factors.

Borrowing from Other Nations Is Necessary to Finance