ECONOMICS (CBSE/UGC NET)

ECONOMICS

BALANCE OF PAYMENTS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Between January and March 2019, the UK current account deficit widened by £6.3 billion to £30 billion, or 5.6% of GDP. When is a deficit on the current account of the balance of payments likely to worsen?
A
When the government devalues the currency
B
When prices of imported products that are demand-inelastic increase
C
When the government adopts a contractionary macro policy
D
When the incomes from overseas investment are higher than expected
Explanation: 

Detailed explanation-1: -In the long-term, the United Kingdom Current Account to GDP is projected to trend around-5.20 percent of GDP in 2023 and-4.40 percent of GDP in 2024, according to our econometric models.

Detailed explanation-2: -In simple terms, this means that the UK government has been borrowing to cover the difference between its outgoings and its tax revenues – the fiscal deficit. The current account deficit indicates that the UK economy as a whole is borrowing from the rest of the world.

Detailed explanation-3: -UK Current Account Gap Narrows in Q3 The current account deficit in the UK shrank to GBP 19.4 billion or 3.1% of the GDP in the third quarter of 2022 from a downwardly revised GBP 33.8 billion in the prior period and compared to market forecasts of GBP 20.8 billion.

Detailed explanation-4: -The primary income balance deficit – which records income the UK receives and pays on financial and other assets, along with compensation of employees – narrowed by £5.2 billion to £3.2 billion in Quarter 1 2019, the narrowest deficit recorded since Quarter 1 2012 when it was £2.7 billion.

There is 1 question to complete.