The argument that U.S current account deficits cause net job losses for Americans ?
Correct answer: D. fails to recognize that a current account deficit is matched by an equal inflow of foreign funds which finances employment increasing investment spending
- A. is true by definition in all possible circumstances
- B. is supported by recent U.S history
- C. focuses only on the overall economy and is thus always true
- D. fails to recognize that a current account deficit is matched by an equal inflow of foreign funds which finances employment increasing investment spending
Explanation
A current-account deficit is matched by a capital or financial-account surplus, meaning foreign funds flow into the country. Those funds can finance domestic investment and employment, so the claim that the deficit automatically causes net job losses is incomplete.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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