Causes of surpluses and deficit on the balance of payments on the current account

Question 1

Causes of Surpluses

Slfin

Answer 1

• strength of economy
  (highquality products at
  low prices)
• .lack of growth in domestic economy so firms compete to sell abroad
• fall in exchange rate
  _ increase quantity of exports if other countries are responsive to lower prices
• net flow of investment income eg investments foreign residents made in country is less than the countryp inhibitants made in Other countries .

Question 2

causes of deficit

Sfrn

Answer 2

• structural problems in economy eg. overpriced poor quality goods
• falling incomes overseas→ falling exports
• rise in exchange rate
• net flow of investment income eg investments foreign residents made in country is more than the country’s inhibitants made in Other countries .