Practice question · Select all that apply
Which statements about a trade deficit are correct?
Hints
- A trade deficit is an accounting identity, not a verdict.
- It has a mirror image in the flow of capital.
Show the answer
- A. Imports exceed exports
- B. It means foreigners are net financing the domestic economy
- D. It reflects the gap between national saving and investment
Why
A deficit is an accounting mirror of capital inflows, not a scoreboard. Whether it is healthy depends on whether the inflow funds factories or consumption.
Practise International Trade
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More questions on International Trade
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