Practice mode / Budget Deficits And The Trade Balance What does the phrase ‘twin deficits’ refer to? A Option A: A country's trade deficit and its net capital outflow deficit B Option B: The equality of a country's saving deficit and its investment deficit C Option C: The fact that if a country has a trade deficit, its trading partners must also have trade deficits D Option D: A country's trade deficit and its government budget deficit Correct answer D. A country's trade deficit and its government budget deficit Explanation A government budget deficit lowers national saving, which reduces net capital outflow and net exports, so budget and trade deficits often occur together. Show answer Report a problem Answer checked 11 October 2026 · How we write and check questions
Question 01 / Budget Deficits And The Trade Balance Which statement about the market for foreign currency exchange is correct? A Option A: An increase in Pakistan's net capital outflow increases the supply of rupees and the rupee appreciates B Option B: An increase in Pakistan's net capital outflow increases the demand for rupees and the rupee appreciates C Option C: An increase in Pakistan's net capital outflow increases the demand for rupees and the rupee depreciates D Option D: An increase in Pakistan's net capital outflow increases the supply of rupees and the rupee depreciates Correct answer D. An increase in Pakistan's net capital outflow increases the supply of rupees and the rupee depreciates Show answer Open question
Question 02 / Budget Deficits And The Trade Balance The EU imposes a quota on clothing imports from China, reducing UK clothing imports. What happens to UK net exports? A Option A: Net exports will remain unchanged B Option B: Net exports will fall C Option C: Net exports will rise D Option D: None of these answers Correct answer A. Net exports will remain unchanged Show answer Open question
Question 03 / Budget Deficits And The Trade Balance Political instability leads Russians suddenly to buy UK assets instead of Russian assets. What happens to the value of the pound and to UK net exports? A Option A: The pound appreciates, and UK net exports fall B Option B: The pound appreciates, and UK net exports rise C Option C: The pound depreciates, and UK net exports fall D Option D: The pound depreciates, and UK net exports rise Correct answer A. The pound appreciates, and UK net exports fall Show answer Open question
Question 04 / Budget Deficits And The Trade Balance What is the effect of an increase in private saving in Pakistan? A Option A: It increases Pakistan's net exports and decreases its net capital outflow B Option B: It increases Pakistan's net exports and net capital outflow by the same amount C Option C: It decreases Pakistan's net exports and net capital outflow by the same amount D Option D: It decreases Pakistan's net exports and increases its net capital outflow Correct answer B. It increases Pakistan's net exports and net capital outflow by the same amount Show answer Open question
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