If a nation is incurring a trade deficit (it is buying more from abroad-importing,than it is selling abroad-exporting),then it is most likely producing beyond the frontier of its production possibilities curve.

Question

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A trade deficit occurs when a country imports more goods and services than it exports. This does not necessarily mean that the country is producing beyond the frontier of its production possibilities curve. Rather, it could be due to factors such as high domestic consumption, low savings rate, or a strong currency that makes imports more attractive than exports.

If a Nation Is Incurring a Trade Deficit (It Is