Question

trade deficit must exist If a country e is facing situation of current account deficit defend or refute the statement with valid argument​

Answer 1

Answer:

The given statement is refuted as the Current Account Deficit (CAD) is a broader concept. CAD occurs when the foreign exchange payments on account of visible, invisibles and current transfers are in excess over the receipts of visible, invisibles and current transfers. A country may face a situation of CAD, even if the country has trade surplus, with greater negative balances on account of services and unilateral transfers.

Explanation:

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Answer 2

Trade deficit must exist If a country e is facing situation of current account deficit defend.

• The current account deficit (CAD), which is a broader notion, contradicts the claim that is made. A currency imbalance (CAD) develops when foreign exchange payments for visible, invisible, and current transfers exceed their respective receipts.
• When imports are more expensive than exports, a country has a trade deficit. Usually, the biggest part of a current account deficit is a trade imbalance. The total value of all items imported and exported is reflected in the trade surplus or deficit. China has the highest current account surplus as of the end of 2020, while the United States has the largest deficit.
• A nation may concurrently have a current account surplus and a trade deficit. This takes place in a nation with significant savings. In a nation with a high rate of saving, citizens lend money to other nations by investing in overseas assets and collecting interest. When exports are fewer than imports, there is a trade deficit. Exports minus Imports is negative when there is a trade deficit because Imports are greater than Exports. When the value of imports (of goods, services, and investment income) exceeds the value of exports, a current account deficit results.
• There will be more imports if the currency is overvalued since they will be less expensive.

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