Should a current account deficit be a cause for alarm?Explain.
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Should a current account deficit be a cause for alarm?Explain.
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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. This is owing to excessive inflation, poor economic development, and the difficulty of exporting due to the fixed exchange rate. As a result of this predicament, a country becomes a debtor to the rest of the globe. However, this should not always be interpreted as a cause for concern, as countries may be running current account deficits to boost productivity and exports in the future. Furthermore, increased investment will aid in the development of capital stock, increasing output in the future.
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