Flashcards
Current account deficits and surpluses
Cards in this deck (6)
- 1Factors that causes a deficit or surplus on any part of the BoP-Imports & Exports- marginal propensity
-Exchange rates - interest rates - inflation
-Relocation of manufacturing to low wage/costs countries
-Investment
-Competitiveness
-Any global changes
-Research and development - 2Define Current AccountThere is a net out flow of demand and so imports are greater than exports
- 3What happens in the short term, when you have current account deficits?-It can boost living standards because it allows consumers to buy more goods
- 4What happens in the long term, when there is a current account deficits?-It could lead to a fall in aggregate demand (AD)
-Lead to loss of jobs
-Lead to currency weakness and higher inflation. Currency weakness can lead to capital flight/loss of confidence
-Reflection of lack of price/non-price competitiveness - 5Causes of current account surpluses-export-orientated growth
-FDI - strong export growth
-Undervalued exchange rate - China
-High domestic savings rate
-Close economy - protectionism
-Strong investment income from overseas investment - 6How to improve trade balances?-Demand management through government policies
-Lower exchange rate
-Raise productivity
-Encourage business start-ups
-Investment in education and training - boost human capital
-Investment in infrastructure
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- A-Level Economics (Unit 4: Global Economy) Flashcards on Current account deficits and surpluses, created by Mary Doria on 29/03/2016.
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- Mary Doria
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