📚 Learning Guide
Current Account Balance Dynamics
medium

An increase in imports will always lead to a current account deficit for a country, regardless of its export levels.

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Learning Path

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Choose the Best Answer

A

True

B

False

Understanding the Answer

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Answer

An increase in imports can lead to a current account deficit, but it doesn't always have to. The current account balance is a measure of a country's trade with the rest of the world, including exports and imports. If a country imports more goods and services than it exports, it may run a deficit. However, if exports also increase significantly, they can offset the impact of higher imports. For example, if a country imports a lot of electronics but also sells a lot of agricultural products abroad, the strong export performance might balance out the imports, preventing a deficit.

Detailed Explanation

This statement is false. Other options are incorrect because Many think that more imports mean a deficit.

Key Concepts

Current Account Balance
Net Exports
Economic Health
Topic

Current Account Balance Dynamics

Difficulty

medium level question

Cognitive Level

understand

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