Should a current account deficit be a cause for alarm? Explain.
Current account deficit is the excess of total imports of goods, services and transfers over total exports of goods, services and transfers. This situation makes a country debtor to the rest of the world. But, this cannot be always treated as a cause for alarm because countries might be running in deficits (current account) to increase productivity and exports in future. Also, more investment will help in building capital stock, which in future will lead to rise in output.
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Current account deficit is the excess of total imports of goods, services and transfers over total exports of goods, services and transfers. This situation makes a country debtor to the rest of the world. But, this canno...
Step-by-step explanation:
• Current account deficit is the excess of total imports of goods, services and transfers over total exports of goods, services and transfers
• This situation makes a country debtor to the rest of the world
• But, this cannot be always treated as a cause for alarm because countries might be running in deficits (current account) to increase productivity and exports in future
• Also, more investment will help in building capital stock, which in future will lead to rise in output
•
This question is important because it tests key concepts from the NCERT syllabus and is frequently asked in CBSE exams.
This question is based on core NCERT concepts explained in the chapter and should be revised thoroughly before exams.
Students often lose marks by skipping steps, writing incomplete explanations, or misunderstanding keywords used in the question.
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