If rate of return earned before the payment of interest and taxes is greater than the interest on
Answers
Incomes and Expenses make up important parts of the economy as they are related to the overall growth of the economy.
Current Income:
It is the money received on short term basis.
Inflow of money.
Current Expenses:
It is the money payed or spent on short term basis.
Outflow of money.
When the current income is less than the current expenditure then that has the following affects:-
1- This shows a trade deficit in the balance of payments.
2- This has negative effects on economic growth
3- Bad affect on the stability of the country.
4- Negative affect on the currency value, which depreciates, weakening our currency. And if we sell goods as exports then we don't get as much money as we should.
5- This leads us to using reserve currencies.
6- Negatively effects the interest rates, further weakening the monetary stance of the economy.
7- Leads to rising prices of inflation.
This overall effects the welfare of society in a bad way.
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