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Account Balance and Budget Balance in United States of America, Australia and Indonesia - Assignment Example

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This paper will begin with the statement that in the economic analysis the current balance refers to the difference between a total value of goods, transfers, and services imported by a given country at a given period and the total exports of goods, transfers, and services…
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Account Balance and Budget Balance in United States of America, Australia and Indonesia
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Download file to see previous pages From the visual representation, it can be observed that over the four years, Indonesia has had a surplus in its current account balances, this means that Indonesia is saving most of its resources than investing those resources. For the case of Australia and the USA, both countries experienced a deficit in their current account, but Australia has gradually improved its current balance. This implies that these countries are investing more than they are saving and thus, they are utilizing resources sourced from other economies in order to finance domestic consumption. Twin deficit refers to a situation a deficit in the national budget leads to an expanded deficit in the current account. Twin deficit proposition, argues that a large budget deficit has a negative impact on the national saving of the country, this, in turn, leads to souring the current account deficit. Although, some economist that this proposition is so weak in explaining this phenomenon (Hansen, 2003). A twin deficit exists in the case of the United States of America where the budget deficit has led to expanding the current account deficit. This implies that the United States acts as the net debtor to other global economies. Therefore, the United States is investing extra resources to other world economies than saving and in return use resources from world economies to fund the domestic consumption. Indonesia has the largest economy in the southeast of Asia, this economy is characterized by a major development in the information technology sector thus having a comparative advantage over countries in the region. Indonesia was worst hit by the recent global financial crisis that hit the world giant economies like the United States. Thus Indonesia has put up measures so to try and shield its citizen from the financial crisis souring economic conditions in the country. The national government of Indonesia has embarked in various fiscal policy stances so to stabilize the economy. In the effort to stabilize the economy the government has decided to increase its expenditure, in this case, the government has decided to offer a subsidy to the citizen so as shield them from the soaring commodities prices. Indonesia government will more spend in the current year in subsiding the fuel prices. ...Download file to see next pages Read More
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