ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An increase in exports
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An increase in imports
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An increase in capital flow
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A decrease in foreign aid provided to other countries
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Detailed explanation-1: -One potential cause of a persistent current account deficit is that of sustained economic growth. Growth in an economy is indicated by a sustained rise in its real GDP, which in turn must mean that the total income of the nation has increased.
Detailed explanation-2: -A nation has a current account deficit when it sends more money to sources abroad than it receives from sources abroad. A trade deficit is normally the largest component of a current account deficit. The trade deficit or surplus reflects the total value of all goods exported and all goods imported.
Detailed explanation-3: -A current account deficit occurs when the total value of goods and services a country imports exceeds the total value of goods and services it exports. The balance of exports and imports of goods is referred to as the trade balance.
Detailed explanation-4: -If a country can attract more financial flows (either short-term portfolio investment or long-term direct investment), then these flows on the financial account will enable the country to run a larger current account deficit.