Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
An increase in imports can lead to a decrease in the current account balance.
B
A current account surplus indicates that a country is exporting more goods and services than it is importing.
C
High levels of imports always result in a negative impact on a country's economy.
D
A decrease in net exports can be offset by an increase in foreign investments.
E
A current account deficit is sustainable if it is financed by foreign investment.
Understanding the Answer
Let's break down why this is correct
Answer
The current account balance is an important part of a country's economy, showing how much money comes in and goes out from trade, investments, and transfers. A positive current account balance means a country is earning more from exports and investments than it is spending on imports and foreign investments. For example, if a country sells a lot of cars abroad but buys fewer cars from other countries, it has a positive balance. Conversely, a negative balance indicates that a country is spending more than it earns, which can lead to borrowing. Understanding these dynamics helps us see how a country's economic health can change over time based on trade and investment activities.
Detailed Explanation
Other options are incorrect because Some people think that more imports always hurt the balance; A surplus means selling more than buying, but it doesn't always mean a strong economy.
Key Concepts
Current Account Balance
Net Exports
Foreign Investment
Topic
Current Account Balance Dynamics
Difficulty
hard level question
Cognitive Level
understand
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