What does a trade deficit imply? A) saving is greater than domestic investment and Y C + I + G B) saving is greater than domestic investment and Y C + I + G D) saving is less than domestic investment and Y

Question

What does a trade deficit imply? A) saving is greater than domestic investment and Y > C + I + G B) saving is greater than domestic investment and Y < C + I + G C) saving is less than domestic investment and Y > C + I + G D) saving is less than domestic investment and Y < C + I + G

Quizplus · Accepted Answer

A trade deficit implies that a country is importing more goods and services than it is exporting. This means that the country is spending more on consumption and investment than it is producing domestically (i.e., saving is less than domestic investment), which can lead to a reduction in national income (Y) relative to total expenditures (C + I + G).

What Does a Trade Deficit Imply