Which of the following statements has usually held true about the relationship between the trade deficits and government budget deficits?
A) There is no relationship between trade deficits and budget deficits.
B) There is a positive relationship between trade deficits and budget deficits.
C) There is a negative relationship between trade deficits and budget deficits.
D) A relationship exists only when there is a balanced budget.

Question

Quizplus · Accepted Answer

Historically, there has been a positive relationship between trade deficits and government budget deficits. A country that imports more than it exports will have a trade deficit, which means there is more money leaving the country than entering it. This can make it difficult for the government to maintain a balanced budget and can lead to budget deficits. In order to finance the deficit, the government may need to borrow money, which can increase its overall debt. However, it is important to note that this relationship is not always consistent and can vary depending on a number of factors.

Which of the Following Statements Has Usually Held True About