Question

"Trade Deficit must exist if a country is facing situation of Current Account Deficit (CAD)." 

Defend or refute the above mentioned statement with valid arguments.

Answer 1

1. The reason for this is that the term "current account deficit" refers to a broader situation in which foreign exchange payments for all current account items visible, invisible, and current transfers are more significant than the foreign exchange receipts for the visible, invisible, and current transfers.
2. In contrast, a trade deficit occurs when the amount of commodities imported crosses the amount of products exported. In other words, if total exports, including services and transfer payments, exceed imports, the nation may have a current account surplus even if there is a trade deficit.