Question

A country has a trade deficit. Its a net capital outflow must be negative and saving is larger than investment. b net capital outflow must be negative and saving is smaller than investment. c net capital outflow must be positive, and saving is larger than investment. d net capital outflow must be positive and saving is smaller than investment.

Answer 1

D. Net capital outflow is positive and saving is larger than investment.

Step-by-step explanation:

Any country is said to be in a state of Trade deficit after looking at several factors such as investments, consumption, Exports, Imports and Savings.

From the question the answer is easily evident as you can see that the net capital outflow will always be positive "when the Outflow of money is more than the inflow of money in the country".

Secondly, the savings matter a lot, in this case the savings are larger than the investments , which means that the Investments are low and hence the return that country is generating is less which ultimately leads to less GDP growth, which can contribute to trade deficit.

Hope this helps you out. Good Luck.