If a country has a trade deficit, does it indicate that the country has a serious problem?

a. No. Trade deficits occur when a country's investment spending is higher than its level of saving.

b. Yes. Trade deficits occur when a country does not have a comparative advantage in production.

c. Yes. Trade deficits occur when a country has a high budget surplus.

d. Yes. Trade deficits occur when a country has low productivity.

Question

Business

Nash Clements

19 November, 04:26

If a country has a trade deficit, does it indicate that the country has a serious problem?

a. No. Trade deficits occur when a country's investment spending is higher than its level of saving.

b. Yes. Trade deficits occur when a country does not have a comparative advantage in production.

c. Yes. Trade deficits occur when a country has a high budget surplus.

d. Yes. Trade deficits occur when a country has low productivity.

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Answers (1)

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Mayo · Answer 1

No, Trade deficits occur when a country's investment spending is higher than its level of saving

Explanation:

As sad above trade deficits occur when a country's investment spending is higher than its level of saving but it is not a serious problem.

Trade deficit is that in which the imports are more than the export. Trade deficit can cause problem like balance of payment which affects the shortage of foreign exchange and this situation can hurt the countries. Trade deficits not only affects foreign exchange but it also affects the economic stability and growth process.

The trade balance can corrected by consuming less and by saving more, and even by depreciate the exchange rate.