Among the indicators of the state of the economy in a country is the CAD…
2016
Among the indicators of the state of the economy in a country is the CAD (Current Account Deficit), which is a measure of a country's trade in which:
- A.
The volume of imports of goods and services exceeds the volume of exports.
- B.
The volume of exports of goods and services exceeds the volume of imports.
- C.
The quantity of both imports and exports decreases.
- D.
The quantity of imports of goods and services remains equal to the quantity of exports.
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Correct answer: A
A Current Account Deficit (CAD) occurs when a country's imports of goods and services exceed its exports. In other words, the country spends more foreign exchange on imports than it earns through exports.
CAD=Imports−Exports(when Imports > Exports)
A persistent CAD indicates that a country is relying on foreign capital inflows to finance its external transactions.