Current Account deficit A record of the dealings made between a nation and the rest of the world during a particular time period is called the Balance of Payment (BoP) of that country for that year. The transaction includes both exports and imports of both visible and invisible goods and export and import of financial assets…
Download file to see previous pages...
Deficit therefore implies that the value of the payment for the imports is greater than the receipt from the exports. The factors responsible for a current account deficit are:- Decline in domestic savings The domestic savings of a country is the path of increasing investments as in economics savings is considered to be identical to investments. If there is a continuous decline in the savings of a particular country then the scope of investment will causes an increase in the real interest rate of the country. Increase in the domestic interest rate (real) in turn attracts more foreign investment in the country as the scope of return is expected to be high. With increasing foreign investment the demand of the home currency in the foreign exchange market also increases because of the need of currency conversion. This creates an upward pressure on the value of the domestic currency in comparison to the foreign currencies. Moreover, with the decrease in savings as a percentage of the total Gross Domestic Product of the country, consumption increases. Thus the demand for goods and services in the economy increases and if the domestic producers fail to meet up the increasing domestic demand of the country the import of the country increases resulting in a deficit in the current account. (Arnold).
...Download file to see next pagesRead More
Cite this document
(“Describe only four (4) factors that create a current account deficit Essay”, n.d.)
Retrieved from https://studentshare.org/other/1405942-describe-only-four
(Describe Only Four (4) Factors That Create a Current Account Deficit Essay)
“Describe Only Four (4) Factors That Create a Current Account Deficit Essay”, n.d. https://studentshare.org/other/1405942-describe-only-four.
Simply put, Net Foreign Asset is the total current value of its offshore asset less the current value of other countries’ asset within its borders. And, Current Account is the sum of Balance of Trade, net Factor Income and net Transfer Payments. Balance of Trade, in the meantime, is the total current value of exported goods and service less the total value of imported goods and services.
While the current account surplus increases a country's net foreign assets, a current account deficit does the reverse. It is evident from the above definitions that huge amounts of current account deficit may not be good for the economic growth. Current account deficits occurs when a country’s imports exceeds the exports.
ficits provide the economy with a small boost, but if allowed to continue on its path of projected growth, deficits will eventually result in the lower standards of living caused by a sustained stagnation of the economy. Citizens will also be deprived of various government
Dialogue David meets Steve during lunch break and says, “Hi, Steve. We have interacted for a long period in the organization and I have in more than one instance noted differences in our opinions regarding moral issues. It bothered me for a while before I suspected that we could be having different moral perspectives.
Thesis Grade retention is ineffective strategy because teachers have insufficient knowledge about retention issues and most students perform poor results after grade retention leaving school without degrees.
Recent research studies prove that grade retention is ineffective because of misdiagnoses the problem.
The economic growth of a country can be described as the long term increase in the ability of the country to supply better economic goods, with more choices to its people. The question now arises that how does this capacity in
Newton’s first law of motion states that any object in a state of motion remains in this state of motion unless an external force is applied upon it. Since space has no air or any other forces in it, it means that a
In every instance of orbit, the satellite swath covers a specific area of the earth. The satellite orbit’s elevation is designed in a manner that allows the swath to retrace a similar path and location repetitively over an interlude of
The term religion comes from Latin word "religio" meaning the worship of demons long before Jesus Christ by the Romans (Frazer 30). Religion, therefore, consists of cultural systems, feelings and beliefs that provide a guideline in relation to
This is inclusive of positional market leadership and profitability. Huge percentage of companies tend to have recognition programs that are either tenure based or ad hoc and these programs do not reinforce messages that are
8 Pages(2000 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Describe only four (4) factors that create a current account deficit. Leave a space between each factor for FREE!