Question

Which of the following points are related to the current alarm?

Options

• Current account deficit is the excess of total imports of goods, services and transfers over total exports of goods, services and transfers.

• This situation makes a country debtor to the rest of the world.

• Both current account deficit is the excess of total imports of goods, services, and transfers over total exports of goods, services, and transfers, and this situation makes a country debtor to the rest of the world. 

• None of the above

Answer 1

Both current account deficit is the excess of total imports of goods, services, and transfers over total exports of goods, services, and transfers, and this situation makes a country debtor to the rest of the world.

Explanation:

The difference between total imports of goods, services, and transfers and total exports of goods, services, and transfers is known as the current account deficit. In this condition, a country becomes indebted to the rest of the world. However, this should not be interpreted as a cause for panic because countries may be running current account deficits in order to boost productivity and exports in the future. Furthermore, the investment will aid in the development of capital stock, resulting in an increase in output in the future.