Question

Select one or more of the choices below that would properly complete the following statement.When a nation runs a trade deficit,--> its output exceeds the sum of its consumption, investment, and government purchases.--> its saving exceeds its domestic investment--> it experiences a capital inflow.

Answer 1

Answer: it experiences a capital inflow.

Explanation:

A trade deficit is a situation that occurs when the imports of a country is greater than the exports of the country. This is usually measured in monetary terms. For example, let's say in a certain year, the United States exported $3 trillion in goods and it imported goods worth $4 trillion, th n the trade deficit will be ($4 trillion - $3 trillion) = $1 trillion.

Trade deficit can be caused because of capital deficiency. This will then lead to capital flowing into the country that is experiencing the trade deficit.