Unit 4.6 · Balance of Payments
Correcting a Current Account Deficit (HL only)
AO2HL
Syllabus Requirement
Measures like expenditure-switching (e.g. tariffs, devaluation), expenditure-reducing (e.g. contractionary fiscal/monetary policy), and supply-side policies.
Assessment Objectives
AO2Application and Analysis
HLThis topic is assessed at Higher Level only.
Summary
A current account deficit occurs when a country's imports exceed its exports, leading to more money flowing out than coming in. This situation can arise from various factors, including higher domestic production costs and an unfavorable exchange rate, which make exports less competitive. Understanding how to correct a current account deficit is important for maintaining economic stability.