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

Gross barter terms of trade, tion..What is the range of gross barter terms ...

tion..What is the range of gross barter terms of trade ?

Define countertrade and different forms of countertrade, Q. Define countert...

Q. Define countertrade. Discuss the different forms of countertrade? Counter trade means all types of foreign trade in which the sale of goods to another country is associated

Economic growth, Q. It is impossible for economic growth in a small countr...

Q. It is impossible for economic growth in a small country to lower that country's economic welfare, regardless of the bias of the growth. Explain. Answer: This is a true st

Discuss the costs and benefits of fdi to host country, Q. Discuss the costs...

Q. Discuss the costs and benefits of FDI to host country? Benefits to host country Availability of scarce factors of production Improvement in the balance of payment Strengthen

Benefits enjoyed by indian companies, "1. Describe the important benefits e...

"1. Describe the important benefits enjoyed by Indian companies through TRIPs. Elaborate the main objectives of WTO in global economy. 2. "Leontiff paradox is proved in the Indian

Study the effects of a change in market, Q. Use a figure to study the effec...

Q. Use a figure to study the effects of a change in market belief with regard to the fixed exchange rate, in particular assume market participants expect the government to devaluat

Trade Balance, derive the eqilibrium equation for the trade balance

derive the eqilibrium equation for the trade balance

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

Excessive current account surpluses, Q. Using an equation, explain why gove...

Q. Using an equation, explain why governments prefer to avoid excessive current account surpluses. Answer: This pursue from the national income identity S = CA + I which says

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