Answer :
In all other circumstances, a country's net foreign assets will decrease if it consistently runs current account deficits.
What transpires when a current account deficit exists?
A country that has a current account deficit is one that imports more than it exports. Developed nations typically have deficits, whereas emerging economies frequently have surpluses. An economy may benefit from a current account deficit if external debt is utilised to fund profitable investments.
Why does a current account deficit cause currency depreciation?
Since a larger trade deficit will increase the current account deficit, experts have suggested that domestic forces may also exert pressure on the rupee. A sizable current account deficit could cause the rupee to weaken much more if the central bank does not take substantial action.
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