Q. With reference to the Current Account Deficit (CAD) consider the following statements::
1.Current Account Deficit implies the country is exporting more goods and services in value than the imports.
2.A country having large current account deficit is always at risk of seeing the value of the currency fall.
3.A trade deficit is normally the largest component of a current account deficit.
Which of the statements given above are correct?

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: B
Notes:

Explanation –

Statement 1 is incorrect. Current Account Deficit implies the country is importing more goods and services in value than the exports.

Statement 2 and 3 are correct. A country having large current account deficit is always at risk of seeing the value of the currency fall. A trade deficit is normally the largest component of a current account deficit.

Source: The Indian Express