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A country is said to have a current account deficit if its financial outflows are greater than its financial inflows. Hence, the current account has a negative balance .
Causes of a current account deficit
A deficit on the current account can occur due to a combination of two factors:
Lower demand for exports
This could be caused by
a decline in competitiveness.
an economic recession in foreign markets
a higher exchange rate
Increased demand for imports
This can be caused by
cheaper or better quality imports
a growing domestic economy
Economics notes on
Current account deficit
Perfect for A level, GCSEs and O levels!
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