To reduce a current account deficit, a country should either decrease the budget deficit of its government or reduce investment spending relative to saving.

Question

Quizplus · Accepted Answer

A current account deficit means that a country is importing more than it is exporting, which can be due to excessive borrowing from abroad (i.e. increased investment spending relative to saving). To reduce this deficit, a country can either decrease government spending (i.e. decrease the budget deficit) or decrease investment spending relative to saving.

To Reduce a Current Account Deficit, a Country Should Either