Question

C. Short Answer Questions (word limit 100 words)
1) Current account deficit.​

Answer 1

Answer:

The current account deficit is a measurement of a country's trade where the value of the goods and services it imports exceeds the value of the products it exports.The current account represents a country's foreign transactions and, like the capital account, is a component of a country's balance of payments (BOP).

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Answer 2

In International Trade,current account deficit(CAD) refers to a particular situation when the overall value of import by any country surpasses or exceeds the value of export generated by the country.

Explanation:

In the case of international trade,CAD denotes the deficit that occurs when the total value of import registered by any country exceeds the total value of exports generated by the country.As this difference between the total value of import and export expands,the CAD also increases progressively.Now basically,when a country exports its domestic goods and services or any financial assets to any country,it gains foreign currency or reserve when the importing country pays for the value of exports and hence,export activities are major sources of foreign capital inflow for any country.In contrast,when a country imports or purchases goods and services or any financial asset from any other country,it automatically incurs a financial liability or debt to the exporting country and therefore,in this case the import activities lead to capital outflow for the importing country.Hence,to reduce or control the CAD,one of the prominent strategies for any country is to increase the export activities and control or decrease the import which will ensure higher capital inflow than outflow which can consequently check or reduce the CAD.