Investment and Current Account Deficit
Discuss whether or not an increase in investment would reduce a deficit on the current account of the balance of payments.
Macroeconomic Factors and Policies
Frequently asked question
An outline for discussing the impact of the current account of the balance of payments on the economy.
- Definition of the current account of the balance of payments
- Importance of analyzing its impact on the economy
II. Reasons why the current account may lower costs of production and increase demand for exports
- Advanced technology and efficient production
- Investment in human capital
- Increase in quality of domestically produced products
- Increase in primary income
III. Reasons why the current account may not have a positive impact on the economy
- Investment in imported capital goods
- Investment in products not in demand abroad
- Short-term increase in aggregate demand causing inflation
- Net exports not rising due to other factors
- Insufficient investment to make a difference
- Summary of the impact of the current account on the economy
- Importance of monitoring and managing the current account to ensure a positive impact on the economy.
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