Sia
Question
Statistics
Posted 9 months ago
Which of the following describes something that would definitely be recorded as an increase in the current account?
Choose 1 answer:
(A) An increase in net exports
(B) Selling bonds domestically
(C) Selling bonds to foreign citizens
(D) An increase in real GDP
(E) A decrease in factor income earned abroad
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Answer from Sia
Posted 9 months ago
Solution by Steps
step 1
Identify the components of the current account: The current account includes transactions like net exports (exports minus imports), net income on investments, and net transfer payments
step 2
Analyze the answer choices in relation to the current account: We need to determine which option would lead to an increase in the current account balance
step 3
Evaluate the answer choices:
- (A) An increase in net exports would increase the current account because it means the country is exporting more than it is importing.
- (B) Selling bonds domestically does not affect the current account as it is a financial account transaction.
- (C) Selling bonds to foreign citizens is also a financial account transaction.
- (D) An increase in real GDP does not directly affect the current account.
- (E) A decrease in factor income earned abroad would actually decrease the current account, as it means the country is earning less from its investments overseas
∻Answer∻
A
Key Concept
Net exports and the current account
Explanation
An increase in net exports leads to an increase in the current account balance, as it indicates a country is selling more goods and services abroad than it is buying from foreign markets.
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