Question

A nation's trade deficit will tend to expand when its economy is expanding. its economy is shrinking. its investment environment is less attractive to foreigners. both b and c above are true.

Answer 1

Choice (A) is the correct answer. When an economy is expanding, the country will be able to purchase more products from foreign businesses, while also being able to produce more products. This will, in turn, cause the trade deficit to rise while still keeping productivity at the required high level.