5.3 - Signposting

Question 1

Consequences of a Current Account Surplus

Answer 1

1. There is likely to be an increase in AD and an increasing in the value of (X-M) in the AD equation
2. Unemployment decreases
3. Demand pull inflation increases
4. Current account surpluses will put upward pressure on the exchange rate which is beneficial for a net importer and not beneficial for a net exporter