6 Questions
What is a consequence of financing a trade deficit by selling off assets?
Increase in foreign claims against South African assets
What is a potential benefit of a large surplus on the financial account?
More rapid increase in South Africa's production capacity
What is a consequence of a current account deficit for South Africa?
Increase in both its debt to people abroad and the value of foreign claims against assets in South Africa
When can South Africa regain ownership of its domestic assets that have been sold to foreigners?
When it exports more than it imports
What is a potential cost of current consumption gains delivered by current account deficits?
Permanent debt, permanent foreign ownership or large sacrifices of future consumption
Why is a trade deficit considered unfavourable?
It must be financed by borrowing from the rest of the world, selling off assets, or dipping into official reserves
Test your knowledge on the implications of a trade deficit and how it affects a country's economy. Learn about the financing of current account deficits and its impact on a nation's debt and foreign claims. Take this quiz to understand the trade deficit dynamics in South Africa.
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