If Spain has a trade deficit,then
A)foreign countries purchase more Spanish assets than Spain purchases from them.This makes Spanish saving greater than Spanish domestic investment.
B)foreign countries purchase more Spanish assets than Spain purchases from them.This makes Spanish saving smaller then Spanish domestic investment.
C)foreign countries purchase fewer Spanish assets than Spain purchases from them.This makes Spanish saving greater than Spanish domestic investment.
D)foreign countries purchase fewer Spanish assets than Spain purchases from them.This makes Spanish saving greater than Spanish domestic investment

Question

Quizplus · Accepted Answer

A trade deficit means that Spain is importing more goods and services than it is exporting. To finance this deficit, Spain must borrow from abroad, which implies that foreign countries are purchasing more Spanish assets than Spain is purchasing from them. This situation results in Spanish saving being smaller than Spanish domestic investment.

If Spain Has a Trade Deficit,then