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

Explain the specific objectives of fiscal incentives, Question: (a) ...

Question: (a) Illustrate the differences between inter and intra industry trade. (b) Foreign Investors generally tend to adopt a two-stage process when evaluating count

Assignment, Road,railway,air and shlping transportation

Road,railway,air and shlping transportation

Globalization, Globalization The procedure of interlinking financial ma...

Globalization The procedure of interlinking financial markets in various countries into a common, world pool of funds to be accessed by both between borrowers  and lenders. It

Net barter terms of trade, what are the limitations of the net barter terms...

what are the limitations of the net barter terms of trade?

What monetary measures keep current exchange rate constant, Q. Suppose E is...

Q. Suppose E is fixed at E 0 and that the asset markets are in equilibrium. Suddenly output rises. What monetary measures keep the current exchange rate constant given unchanged e

Extensive import-substitution industrialization, Q. The United States, as ...

Q. The United States, as it began its long and unbeaten growth in the early 19th Century, consciously promoted domestic production through such activities as tariffs, Clay's Ameri

International monetary system, Q. How did the international monetary syste...

Q. How did the international monetary system influence macroeconomic policy-making and performance during the gold standard era (1870 - 1914)? Answer: London was the hub of t

What factors lie behind capital inflows to developing world, Q. Wha...

Q. What factors lie behind capital inflows to the developing world? Answer: Several developing countries have received a lot of capital inflows that lead them to an

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