Which of the following statements is true about a country with a trade deficit?

Question

a. Net capital outflow must be positive.
b. Net exports are negative.
c. Net exports are positive.
d. Exports exceed imports.
e. None of the above is true.

Answer 1

The correct statement about a country with a trade deficit is:

b. Net exports are negative.

A trade deficit occurs when a country's imports exceed its exports, which means that net exports (exports minus imports) are negative. Therefore, option b is true.

• Option a is false because a trade deficit usually corresponds to net capital inflow rather than outflow.
• Option c is false since net exports are negative in a trade deficit.
• Option d is also false because exports do not exceed imports in a trade deficit.
• Therefore, option e is also false.

The true statement is b.