Under the simplifying assumptions made in the text, a current account deficit
A) arises when imports exceed exports.
B) arises when the purchase of foreign assets by a nation's citizens exceed the purchase of domestic assets by a nation's citizens.
C) is necessary for a long run economic growth.
D) arises when a country's exchange rate falls.

Question

Quizplus · Accepted Answer

Under the simplifying assumptions made in the text, a current account deficit arises when imports exceed exports. This is because the current account measures the flow of goods and services between countries, and a deficit means that a country is importing more than it is exporting.

Under the Simplifying Assumptions Made in the Text, a Current