5.1 Signposting

Question 1

Demand Side Causes of a Current Account Deficit (Opposite for a Surplus)

Answer 1

1. Strong domestic growth (higher incomes at home)
2. Recession abroad (low Incomes abroad)
3. A strong exchange rate

Question 2

Supply Side Causes of a Current Account Deficit (Opposite for a Surplus)

Answer 2

1. Low labour productivity
2. High minimum wages
3. Poor Investment
4. Higher Relative inflation
5. Government restrictions on free trade
6. Loss of comparative advantage.
7. Resource Depletion.