Explain why current account deficits may or may not be harmful to a country
What will be an ideal response?
On the positive side, a current account deficit enables more investment than would be possible otherwise, and since higher investment is correlated with higher living standards, the current account deficit might be interpreted as beneficial. In addition, the capital inflows associated with current account deficits are an implicit vote of confidence by foreigners. On the negative side, capital inflows that occur with a current account deficit increase the stock of foreign-owned assets inside the home country, raising the possibility that a change in investor expectations about the economy's future can lead to a sudden surge in capital outflows. In the worst case scenario, capital flight is followed by a depletion of international reserves and a financial crisis.
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How does the creation of a successful movie influence what, how, and for whom goods and services are produced?
What will be an ideal response?
Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand
A) decrease; increase B) increase; decrease C) decrease; decrease D) increase; increase
Moral hazard refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off
Indicate whether the statement is true or false
A demographic trend is that:
a. Individuals increasingly put off marriage and childbirth to later years b. The number of families is decreasing c. Families are the same as they were two decades ago d. Grandparents matter less than they used to