Which of the following is not a factor explaining how deficits on current accountdevelop?
A) high interest rates
B) budgetary deficits
C) negative balance of payments
D) imports into Canada from other countries increase
E) the country's popularity because of the strength and stability of its economy

Question

Quizplus · Accepted Answer

A current account deficit occurs when a country spends more on foreign trade than it is earning and borrows from foreign sources to make up the difference. High interest rates (A) can attract foreign capital, affecting the exchange rate and impacting the current account. Budgetary deficits (B) can lead to borrowing from foreign lenders, affecting the current account. Imports exceeding exports (D) directly contribute to a current account deficit. A strong and stable economy (E) can attract investment and affect the trade balance. However, a negative balance of payments (C) is a broader concept that includes the current account but also financial and capital accounts, making it an outcome of various factors, including the current account deficit, rather than a cause of the current account deficit itself.

Which of the Following Is Not a Factor Explaining How