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Explain the various factors that would lead to an increase in the size of the Deficit on the Current Account of the Balance of Payments
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Explain the various factors that would lead to an increase in the size of the Deficit on the Current Account of the Balance of Payments The current Account is a key indictor for the British economy. It is the sum of four separate trade balances between the UK and the Rest of the World. The Current Account records the exports and imports of both visible invisible items. Therefore a deficit on the Current Account occurs when we was a country are either importing too many goods and services from abroad, or are not exporting enough, usually it is a mixture of both. UK consumers have a high income elasticity of demand therefore the demand for imported goods increases, also as people feel more wealthy they are more likely to spend on luxury goods such as holidays abroad. These holidays are also made to look more attractive with the advertising campaigns by...
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