Which of the Following Is True About How Trade Deficits

Multiple Choice

Which of the following is true about how trade deficits and government budget deficits are related?

A) The trade deficit leads to a reduction in investment that leads to a government budget deficit.
B) The trade deficit leads to a decline in imports relative to exports that leads to a government budget deficit.
C) The government budget deficit leads to higher interest rates that will lead to a trade deficit.
D) The government budget deficit leads to lower interest rates that will lead to a lower trade deficit.