Which of the following would decrease the size of the deficit in the current account of Australia?
A) An increase in imports
B) A decrease in exports
C) A decrease in the amount of income Australian companies pay to foreigners who own investments in Australia
D) An increase in the amount of money the Australian government sends in foreign aid to other countries

Question

Quizplus · Accepted Answer

A decrease in the amount of income Australian companies pay to foreigners who own investments in Australia would decrease the outflow of money from Australia to foreign investors, thus reducing the deficit in the current account.

None of the other options would decrease the deficit in the current account. A increase in imports (option A) would increase the deficit by increasing the outflow to pay for those imports. A decrease in exports (option B) would also increase the deficit by reducing the inflow from exports. An increase in foreign aid (option D) would also increase the outflow from Australia, thus worsening the deficit.

Which of the Following Would Decrease the Size of the Deficit