Other things being equal,an increase in the current account deficit may be due to

Question

Quizplus · Accepted Answer

A fall in the government's budget surplus means that the government is spending more than it is receiving in revenues, which can lead to an increase in the current account deficit as it may need to borrow from foreign sources to fund its expenditures. The other options listed are not necessarily related to the current account deficit. A) An increase in private saving may actually reduce the current account deficit as it could lead to more funds available for domestic investment. B) A fall in domestic investment could potentially reduce the current account deficit if it means that there is less demand for foreign investment. C) A rise in the government's budget surplus would mean that the government is receiving more in revenues than it is spending, which may have no direct impact on the current account deficit. E) A fall in the government's budget deficit implies that the government is spending less than it is receiving in revenues, which may have no direct impact on the current account deficit.

Other Things Being Equal,an Increase in the Current Account Deficit