Question

Which of the following could be a disadvantage of a trade deficit to an economy?

Select the correct answer below:


The economy with a trade deficit will be an exporter of capital.

The economy with a trade deficit will be an importer of capital.

The economy with a trade deficit could have imports that offer more value.

The economy with a trade deficit will be a net lender to the rest of the world.

Answer 1

There are several disadvantages of Trade deficit. The economy with a trade deficit will be an importer of capital.

Other Disadvantages include:

• Negative Balance of Trade (BOT) can result in lower Gross Domestic Product (GDP)
• A negative Balance of Trade can also lead to a deflationary situation.

• The inflow of financial capital may not increase productivity adequately

Trade deficits are regarded commonly as the difference between how much a country imports and how much it exports. when negative, they can harm labor markets and make obstacles of savings and investment.

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