A country has a trade deficit.Its
A)net capital outflow must be positive,and saving is larger than investment.
B)net capital outflow must be positive and saving is smaller than investment.
C)net capital outflow must be negative and saving is larger than investment.
D)net capital outflow must be negative and saving is smaller than investment.

Question

Quizplus · Accepted Answer

A trade deficit means that a country is importing more goods and services than it is exporting, which means that its net capital outflow (the difference between the money flowing into and out of a country) must be negative. This means that the country is investing more than it is saving, which is represented by a negative net capital outflow. Hence, the correct choice is D where the net capital outflow is negative and saving is smaller than investment.

A Country Has a Trade Deficit.Its