ECONOMICS
BALANCE OF TRADE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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Detailed explanation-1: -A current account deficit indicates that a country is importing more than it is exporting. Emerging economies often run surpluses, and developed countries tend to run deficits. A current account deficit is not always detrimental to a nation’s economy-external debt may be used to finance lucrative investments.
Detailed explanation-2: -3. If a country has a current account deficit, which of the following must be true? (B) It must show a surplus in its capital account. Explanation: In the long run, the balance of payments equals zero. Deficits in one account will be offset by surpluses in the other account.
Detailed explanation-3: -Very poor countries typically run large current account deficits, in proportion to their gross domestic product (GDP), that are financed by official grants and loans.
Detailed explanation-4: -A country with trade deficit cannot have current account surplus in its Balance of Payments.