Final answer:
A capital account deficit indicates that capital outflows exceed inflows, meaning the country is a net borrower from abroad. This is different from a trade deficit, which involves imports and exports.
Step-by-step explanation:
When there is a capital account deficit, it implies that capital outflows exceed inflows. This scenario indicates the country is a net borrower from abroad, as foreign investments within the country are less than the domestic investments going out of the country. A current account deficit is reflected by an overall net inflow of foreign investment capital into the country. Conversely, a current account surplus would mean the country is a net lender, where domestic investments abroad exceed foreign investments coming into the country. The situation of a capital account deficit is separate from the balance of trade, which deals with imports and exports. While a current account deficit is concerned with the flow of financial capital, a trade deficit—when a nation's imports exceed its exports—is a matter of the flow of goods and services.