Understanding Trade Deficits and Current Account Financing

Increase in foreign claims against South African assets (correct)

Decrease in foreign claims against South African assets

Reduction in South Africa's official reserves

No impact on foreign claims against South African assets

Reduced foreign lending to South African firms

More rapid increase in South Africa's production capacity (correct)

Increased foreign ownership of domestic assets

Reduced production capacity in South Africa

Increase in South Africa's claims against foreign assets

Increase in both its debt to people abroad and the value of foreign claims against assets in South Africa (correct)

No impact on South Africa's debt to people abroad

Decrease in South Africa's debt to people abroad

<p>When it exports more than it imports (D)</p> Signup and view all the answers

<p>Permanent debt, permanent foreign ownership or large sacrifices of future consumption (C)</p> Signup and view all the answers

<p>It must be financed by borrowing from the rest of the world, selling off assets, or dipping into official reserves (A)</p> Signup and view all the answers