A Current Account Deficit

question 95

Multiple Choice

A current account deficit

• A) will not pose a problem, especially if it is accompanied by an expansionary fiscal policy.
• B) may pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future.
• C) may still pose a problem, even if the borrowed funds are channeled into productive domestic investment projects.
• D) There is no relation between current account surplus and between savings and investment.
• E) will pose a problem because the country is borrowing funds from the rest of the world that it won't be able to pay back later.

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Definitions:

Deductibility

The ability of a taxpayer to subtract certain expenses or contributions from their gross income, reducing the amount of taxable income.

Casualty Deduction

A tax deduction for losses incurred from the sudden, unexpected, or unusual destruction of property.

Personal Casualty Losses

Financial losses resulting from the damage, destruction, or loss of personal property from events like natural disasters, theft, or accidents, which may be deductible under certain conditions.

Termite Damage

Damage caused to structures (like homes) by termites, often leading to costly repairs and impacting property value.