The fact that the United States has a trade deficit means that a. U.S. workers cannot compete with workers overseas. b. the United States has a surplus in its capital account. c. interest rates in the United States are low compared to the world average. d. the United States has a deficit in its capital account.

The fact that the United States has a trade deficit means that

a. U.S. workers cannot compete with workers overseas.

b. the United States has a surplus in its capital account.

c. interest rates in the United States are low compared to the world average.

d. the United States has a deficit in its capital account.

 

 

asnwer:

The correct choice is b

Explanation : – When we import more than we export, the negative balance of trade is known as a “trade deficit” or “trade gap” or “current account deficit.” When we export more than we import, it is called a “trade surplus. The balance of payments among countries consist of two sub accounts , one is called the ” current account”, which consists largely of the trade balance and the other account is the capital account . A country’s current and capital account must offset each other . Thus if a country has a current account or trade deficit , it has a corresponding capital account surplus . Thus a country with a trade deficit is offset by net foreign capital and financial inflows . In other words foreigners are financing the country’s trade deficit with their capital , giving the country a capital account surplus .

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