Question

To a macroeconomist, a trade deficit is synonymous with which of the following?

Answer 1

Answer:

  A. outflow of financial capital

Explanation:

A trade deficit means more money is leaving the country to purchase imports than is entering the country to purchase exports. There is a net flow of financial capital out of the country.

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Whether goods and services flow in or out depends on the nature of the trade. A trade deficit can also be created when residents spend money in a foreign country while on travel there. No goods or services actually cross a border in that case.