If there is a trade deficit that creates a current account deficit

Question

Quizplus · Accepted Answer

A trade deficit means that a country is importing more goods and services than it is exporting, which will create a current account deficit. However, the current account is only one part of the balance of payments, which also includes the capital account. A capital account surplus would mean that the country is receiving more investment from foreign sources than it is investing abroad, which would offset the current account deficit. Therefore, a trade deficit could be accompanied by a capital account surplus, indicating that foreign investors have confidence in the country's economy, and vice versa.

If There Is a Trade Deficit That Creates a Current