Economics Year 13 revision Day 27 - Balance of Payments
On day 27 of the Year 13 Recap we review the balance of payments and more specifically the solutions that are put forward to correct large trade deficits and surpluses.
A deficit may sound bad and a surplus may sound good, but the reality is that some countries have to run a large surplus to finance the large deficits belonging to other countries. So should we really be as concerned with these trade statistics as we might think?
Well the answer to this question is that it depends on the context of the deficit and surplus that we are dealing with. Yes, a large current account deficit is possibly a sign of an economy driven by strong consumer spending, but is it also a sign of an unbalanced and unsustainable economy? Therefore when discussing this important question it is important you have some examples of internal policies that can be implemented to restore some balance to a country’s trading accounts.
Here Jacob talks you through some of the most popular current account deficit/surplus solutions: