The burden of a current account deficit would be the least if a nation uses what it borrows to finance:
A) Unemployment compensation benefits
B) Social Security benefits
C) Expenditures on food and recreation
D) Investment on plant and equipment

Question

Quizplus · Accepted Answer

When a nation uses borrowed funds for investment on plant and equipment, it may result in increased productivity and competitiveness, thereby increasing exports and decreasing imports, leading to a reduction in the current account deficit. On the other hand, using borrowed funds for consumption purposes (such as unemployment compensation benefits, social security benefits, or expenditures on food and recreation) would likely increase imports, and hence the current account deficit.

The Burden of a Current Account Deficit Would Be the Least