Question

Need and importance of current account

Answer 1

Heyya!!!

A current account deficit means that the value of goods and services imported is greater than the value of exports. A current account deficit requires capital / financial flows to finance this deficit. Despite the double dip recession of 2012, the UK has experienced a widening of its current account deficit. In particular, the UK has a large deficit in the trade in goods.

Some economists argue that a large current account deficit is a sign of an unbalanced economy and could lead to a depreciation in the currency; others argue that if the current account is financed by capital flows, it shouldn’t be of great concern.

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