Suppose a Country Is Currently Experiencing a Trade Deficit

question 25

Multiple Choice

Suppose a country is currently experiencing a trade deficit.In the long run,this could be self-correcting if

• A)the deficit exists because of the import demand for capital goods.
• B)the deficit exists because of the import demand for consumption goods.
• C)the deficit exists because foreigners want to buy the country's currency as an investment.
• D)none of the options

---

Definitions:

Zero-coupon Bond

A bond that does not pay periodic interest and is sold at a discount from face value; its return comes from the difference between the purchase price and the face value paid at maturity.

Yield

The income return on an investment, such as the interest or dividends received, usually expressed as an annual percentage based on the investment's cost, its current market value, or its face value.

Zero-coupon Bond

A debt security that does not pay interest (coupon) but is traded at a deep discount, providing profit at maturity when the bond is redeemed for its face value.

Purchase Price

The amount of money paid to buy goods, services, or assets.