Question

A negative balance in the current account means that

a trade deficit definitely exists.
a trade surplus definitely exists.
the total amount of goods, services, and transfer payments flowing out of the economy is more than the total amount flowing in.
more is being spent on domestic goods than foreign goods.
the capital account is negative.

Answer 1

A negative balance in the current account means that the total amount of goods, services, and transfer payments flowing out of the economy is more than the total amount flowing in. Therefore, the correct option is:

the total amount of goods, services, and transfer payments flowing out of the economy is more than the total amount flowing in.

A negative balance in the current account indicates that a country is importing more goods and services than it is exporting, which leads to an outflow of funds to other countries. This can result in a trade deficit, but it is not a definitive indication of a trade deficit because a country may also be running a surplus on the capital account or receiving foreign aid, which can offset the current account deficit.

Step-by-step explanation: