Consider an increase in a country's current account deficit.Which of the following statements best describes the desirability of this change?

Question

Quizplus · Accepted Answer

The desirability of an increase in current account deficit cannot be determined solely based on the change itself. It might be desirable if the cause of the change is a reduction in the level of private saving or an increase in exports. On the other hand, it might be undesirable if the cause of the change is a decrease in exports or an increase in imports due to domestic consumption. Therefore, the best answer is D, as it acknowledges that the desirability of the change depends on the cause.

Consider an Increase in a Country's Current Account Deficit