Why do governments prefer to avoid current account deficits, International Economics

Assignment Help:

Q. Why do governments prefer to avoid current account deficits that are too large?

Answer: A current account debit may possibly pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. Though sometimes large current account deficits represent temporarily high consumption resulting from misguided government policies or some other malfunctioning of the economy occasionally the investment projects that draw on foreign funds may be badly planned and so on. In such cases the government strength wish to reduce the current account deficit immediately rather than face problems in repaying its foreign debt in the future.


Related Discussions:- Why do governments prefer to avoid current account deficits

Law of demand to operate internationally, Q. Other things being equal, a r...

Q. Other things being equal, a rise in a country's terms of trade enhances its welfare. What could happen if we relax the ceteris paribus assumption, and allow for the law of dema

Effects of increase in european money supply on dollar, Analyze the effects...

Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate. Answer:  The major points are: A raise in the European money supply will reduc

Explain the advantages of free trade, 1. International trade: (a) Explai...

1. International trade: (a) Explain the concept of comparative advantage between two countries (use a numerical example to illustrate, and do not use the identical example in th

Strategies of globalization and regionalization, Describe the strategies of...

Describe the strategies of globalization and regionalization and explain when each strategy can be used effectively.  Give examples of successful companies that have followed each

Comparatitve advantage, what are the limitation of comparative advantage?

what are the limitation of comparative advantage?

Trade, trade experience of developing countries

trade experience of developing countries

What is the theory of second best, Q. What is the theory of Second Be...

Q. What is the theory of Second Best? Answer: The principal of the second best notify us that when an economy suffers from multiple distortions the removal of only a few

Explain why the polish economy has done better, Q. Contrast the crisis in P...

Q. Contrast the crisis in Poland and Russia. Explain why the Polish economy has done better? Answer: With the end of the 1990s a handful of East European economies including

Interest rate differential according to the ppp theory, Q. Describe and exp...

Q. Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected p

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd