Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It leads to a current account deficit, indicating potential economic weakness.
B
It increases net exports, thereby improving the current account balance.
C
It has no effect on the current account balance, as exports remain unchanged.
D
It leads to a surplus in the current account due to higher consumer spending.
Understanding the Answer
Let's break down why this is correct
Answer
An increase in imports usually means that a country is buying more goods and services from other countries. This can lead to a larger trade deficit, which is when a country spends more on imports than it earns from exports. When the current account balance worsens due to higher imports, it can suggest that the country is relying heavily on foreign products, which might affect its economic health. For example, if a country imports a lot of electronics but sells fewer home-made products abroad, it could struggle to create jobs and grow its economy. However, if the imports are for necessary goods or help improve production capabilities, it might benefit the economy in the long run.
Detailed Explanation
When a country imports more, it spends more money on goods from other countries. Other options are incorrect because Some might think that buying more from other countries helps our exports; It’s a common mistake to think imports don’t change anything.
Key Concepts
Current Account Balance
Net Exports and Imports
Economic Health Indicators
Topic
Current Account Balance Dynamics
Difficulty
hard level question
Cognitive Level
understand
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