Reducing a current account deficit requires a country to
A) increase private saving relative to investment.
B) increase private consumption relative to saving.
C) increase private investment relative to consumption.
D) increase private investment relative to saving.

Question

Quizplus · Accepted Answer

A current account deficit means that a country is spending more on imports than it is earning from exports. To reduce this deficit, the country needs to either increase exports or decrease imports. One way to decrease imports is to reduce private consumption, which can be achieved by increasing private saving relative to investment. This would result in less money being spent on imports and therefore a decrease in the current account deficit.

Reducing a Current Account Deficit Requires a Country to