A country experiences a significant rise in real income, leading to increased consumer spending on foreign goods. Which of the following statements best categorizes the impact on the current account and trade balance?

When a country sees a significant rise in real income, people generally have more money to spend. As a result, they often buy more goods from other countries, which means spending increases on foreign products. This increase in spending on imports can lead to a negative impact on the current account, as it reflects more money going out of the country to pay for these foreign goods. For example, if a country starts importing more electronics because people can afford them, its trade balance may worsen since it is buying more than it is selling abroad. Thus, the rise in income can lead to a trade deficit, where imports exceed exports.