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Examine the effects of current account deficits and surpluses on key economic indicators such as GDP, employment, inflation, and exchange rates.

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Cambridge IGCSE EconomicsInternational trade and globalisation

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Examine the effects of current account deficits and surpluses on key economic indicators such as GDP, employment, inflation, and exchange rates

This point belongs to Current account of balance of payments, especially Current account of balance of payments outcomes.
You need to be able to examine the effects of current account deficits and surpluses on key economic indicators such as GDP, employment, inflation, and exchange rates.
The key ideas to know are Analyse, Discuss, and Explain.
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AnalyseDiscussExplain

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Paper 2 structured question: Current account of balance of payments

Paper 2Structured Questions2 marks

Description

Current Account Deficit in Country X

Country X has been importing more goods and services than it exports, leading to a significant current account deficit. This situation has raised concerns about the potential impacts on the economy.

a
Explain the potential effects of a current account deficit on GDP and employment in Country X.
Your answer
Aim for approximately 2 distinct marking points.
[2]

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Related learning objectives

Understand the elements that make up the current account of the balance of payments, including trade in goods, trade in services, primary income, and secondary income. Be able to calculate deficits and surpluses for the current account and its individual components.
Current account of balance of payments outcomes
Identify the reasons that lead to current account deficits and surpluses.
Current account of balance of payments outcomes
Explore various policies that can be implemented to achieve stability in the balance of payments and evaluate their potential effectiveness.
Current account of balance of payments outcomes

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