Question

For 40 years America has run a trade deficit. This sounds bad, and maybe it is bad, but it's important to remember:
A. the trade deficit is very small compared to our overall GDP
B. the money we send abroad buying imports comes back to America as investments
C. America still exports TRILLIONS of dollars worth of goods and services
D. All of the above

Answer 1

D — All of the above, with some important context.

- A (size vs GDP): the U.S. goods-and-services trade deficit is much smaller than total GDP. Recent annual deficits have been on the order of several hundred billion to about $1 trillion, while U.S. GDP is in the tens of trillions — so the deficit is a modest share of GDP (typically a few percent).

- B (capital flows return money): a current‑account deficit means we import more than we export, and the difference is financed by capital inflows. Foreigners buy U.S. assets (Treasuries, corporations, real estate, stocks), so much of the money spent on imports returns as investment and asset purchases in the U.S.

- C (exports are large): the U.S. still sells trillions of dollars of goods and services abroad every year — exports are a major component of the economy even with a persistent deficit.

Caveats: persistent deficits reflect underlying imbalances (e.g., relatively low national saving vs. investment) and can lead to growing foreign claims on U.S. assets and distributional effects across sectors. But the three statements you listed are essentially correct.