Question

The large U.S. current account deficit implies that ________?

1) the U.S. is importing more goods and services than it is exporting
2) the U.S. is exporting more goods and services than it is importing
3) the U.S. is experiencing a surplus in its trade balance
4) the U.S. is experiencing a decrease in its trade deficit

Answer 1

The large U.S. current account deficit indicates that the United States imports more than it exports, leading to a situation where financial capital must flow into the U.S. from other countries.

Step-by-step explanation:

The large U.S. current account deficit implies that the U.S. is importing more goods and services than it is exporting. This situation occurs when a country's imports exceed its exports, resulting in a net inflow of financial capital from abroad to bridge the gap. The U.S. has experienced a pattern of trade deficits starting in the 1980s and continuing through recent years, occasionally seeing some reduction following economic downturns but largely maintaining a deficit position.

While trade deficits themselves are not inherently negative, the sustainability and impact on the economy are subjects of ongoing debate, with concerns about the necessity of gradual reduction versus more immediate measures.