Practice mode Macroeconomic Issues and Analysis

Starting from internal and external balance, what will a fall in aggregate demand do to the current account?

Correct answer D. Surplus

Explanation

Lower aggregate demand reduces incomes and spending, including spending on imports. With exports unchanged, the current account moves from balance into surplus.

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Starting from internal and external balance, what will a fall in aggregate demand do to the current account?

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Starting from internal and external balance, what will a fall in aggregate demand do to the current account?

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