Please enable JavaScript.
Coggle requires JavaScript to display documents.
effect of current account deficit, effect of current account surplus -…
effect of current account deficit
on employment
deficit means import expenditure is greater than export revenue so demand for domestic goods will be less as imports are more
moreover it export revenue is less this suggest that county is not internationally competitive therefore supply decrease in the country
thus, if demand for domestic goods and services will be low and lower due yo less exports then the overall supply of country will decrease which lead to decrease in employment and workers will be redundant because firms will not need many workers of supply is less and because it will save they are cost when profits are low
on inflation
deficit means import expenditure is greater than export revenue so demand for domestic goods will be less as imports are more
decrease in demand of domestic goods and services will lead to decrease in prices of goods and services to increase the aggregate demand
therefore ,decrease in prices will lead to decrease in demand pull inflation in the country
Increase in raw material and capital can increase supply, decreasing the price.
effect of current account surplus
on employment
this means that export revenue is greater than than import expenditure .
this means that the demand of goods and services is high in international market
this will increase the production in export sector in the country .
to increase the supply firms will have to employee more workers which will increase the employment.
on inflation
this means that export revenue is greater than than import expenditure .
as import expenditure is less this suggest that people are buying domestic goods and services which increase the aggregate demand .
increase in demand of goods and services in domestic market will lead to increase in price
increase in prices of domestic goods and services will lead to demand pull inflation in the country
To increase the export, if supply in the domestic market reduces, Price may increase.