Question

The European Union and the United States are trading partners. (a) If the current account balance is zero, will an increase in United States real income result in a current account surplus, deficit, or no change

Answer 1

Answer: Deficit

Explanation:

One of the things a current account shows is the trade balance of a country which is the difference between its exports and its imports.

If real income was to increase in the U.S., her citizens will demand more goods and services as they can afford it.

This will lead to a rise in imports from U.S. trading partners which will then rise more than exports and result in a trade deficit which would lead to a current account deficit.