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How can country with a current account surplus live beyond its means?
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A country that persistently runs a current account surplus is living below its means while if it runs a persistent deficit it is living beyond its means Discuss?
A current account surplus signifies that the country is exporting more than importing or it is supplying more to the world than it takes from other countries. The current account surplus country is NOT consuming all its production, hence living below its means. On the other hand, a country running a persistent deficit in its current account is a net importer and paying more than it is producing, hence living beyond its means. Arun Goel
Function of foreign trade?
(i) Foreign trade creates an opportunity for the produces to reach beyond the domestic markets. (ii) Producers can sell their produce not only in markets located within the country but can also compete in markets located in other countries of the world. (iii) For the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced.
What is the different between need and want?
It is all a matter of desire, a comparison between what I have and what I would like to have. A 'need' is a basic desire and a 'want' is sometimes a dream or something beyond our current mental, physical or financial capabilities. For example, 'I need a roof over my head' but what I want is 'a palace'.
What is convention theory?
Concerns about decision making in presence of imperfect and often asymmetric information, but taking account of: ! Stronger tradition in French economics of collective or social action (beyond methodological individualism) ! Strong interest of French in questions of product quality and problems of ommunicating it (cf. literature on signaling)
Effects of balance of payment deficit to a developing nation?
Pros:Partial auto-correction: If some of the deficit is due to strong consumer demand, the deficit will partially-self correct when the economic cycle turns and there is a slowdown in spendingInvestment and the supply-side: Some of the deficit may be due to increased imports of new capital and technology which will have a beneficial effect on productivity and competitiveness of producers in home and overseas marketsCapital inflows balance the books: Providing a country has a stable economy and credible economic policies, it should be possible for the current account deficit to be financed by inflows of capital without the need for a sharp jump in interest rates. The UK has run an average annual current account deficit of £10 billion from 1992-2004 and yet the economy has also enjoyed one of the longest sustained periods of growth and falling unemployment during that time Cons:Structural weaknesses: The trade / current account deficit may be a symptom of a wider structural economic problem i.e. a loss of competitiveness in overseas markets, insufficient investment in new capital or a shift in comparative advantage towards other countries.An unbalanced economy - too much consumption: A large deficit in trade is a sign of an 'unbalanced economy' typically the consequences of a high level of consumer demand contrasted with a weaker industrial sector. Eventually these "macroeconomic imbalances" have to be addressed. Consumers cannot carry on spending beyond their means for the danger is that rising demand for imports will be accompanied by a surge in household debt.Potential loss of output and employment: A widening trade deficit may result in lost output and employment because it represents a net leakage from the circular flow of income and spending. Workers who lose their jobs in export industries, or whose jobs are lost because of a rise in import penetration, may find it difficult to find new employment.Potential problems in financing a current account deficit: Countries cannot always rely on inflows of financial capital into an economy to finance a current account deficit. Foreign investors may eventually take fright, lose confidence and take their money out. Or, they may require higher interest rates to persuade them to keep investing in an economy. Higher interest rates then have the effect of depressing domestic consumption and investment. The current situation in the United States is very interesting in this respect. Such is the size of the current account deficit that the USA must rely on huge capital inflows each year and eventually investors in other countries may decide to put their money elsewhere - this would put severe downward pressure on the US dollar (see below)Downward pressure on the exchange rate: A large deficit in trade in goods and services represents an excess supply of the currency in the foreign exchange market and can lead to a sharp fall in the exchange rate. This would then threaten an increase in imported inflation and might also cause a rise in interest rates from the central bank. A declining currency would help stimulate exports but the rise in inflation and interest rates would have a negative effect on demand, output and employment.
A country that persistently runs a current account surplus is living below its means while if it runs a persistent deficit it is living beyond its means Discuss?
A current account surplus signifies that the country is exporting more than importing or it is supplying more to the world than it takes from other countries. The current account surplus country is NOT consuming all its production, hence living below its means. On the other hand, a country running a persistent deficit in its current account is a net importer and paying more than it is producing, hence living beyond its means. Arun Goel
Why is trade an important part of a country's economy?
It brings in products that are not made or grown there normally, and sells surplus goods that are beyond what can be used to other countries.
What was one of the basic features of early civilization?
The production of a surplus of food to allow the ability to go beyond getting subsistenceuse the surplus to support cultural activity.
What are the release dates for Beyond Belief Fact or Fiction - 1997 War Surplus 3-29?
Beyond Belief Fact or Fiction - 1997 War Surplus 3-29 was released on: USA: 28 July 2000
What was key featured of early civilizations?
The production of a surplus of food to allow the ability to go beyond getting subsistenceuse the surplus to support cultural activity.
Why does a country running a current account surplus live beyond its means while one that runs a current account deficit live beyond its means?
Perhaps you have made an unintentional substitution in your question? Did you mean to ask why a country with a surplus lives within its means, and a deficit live beyond its means? A country that relies on a current account trade surplus experiences risk as well, but in a different direction as that of a country with a current account trade deficit. Imagine a simplified condition, perhaps two island economies that trade only with one another. One island is rich in natural resources. Their primary trade goods are fruit, meat, and bamboo wood for construction. The other island is more sparsely endowed with natural resources. To survive, the people on the island have become expert at crafting tools. Their primary trade goods are flint spear points, bows and arrows, and axes. The island rich in natural resources requires little labor to accumulate more than enough fruit and wild boar meat, and is a willing trade partner to the other island. They trade food for tools to make shelters and weapons to hunt. During periods of drought or after the occasional infestation of bugs, the food island sometimes is unable to cover the cost of the arrows and spear points they need to replenish their hunting equipment. The tool making island offers credit, as it is in their own best interests for the food island to continue to try to hunt, even if they must loan them the tools without immediate payment. As long as the food island recovers, the drought eases, the grazing for wild boar improves again and resilient strains of the fruit trees survive and eventually thrive, all is well. The debt for additional spear points and arrows to hunt the temporarily scarce boar is repaid with interest and equilibrium resumes. But if the drought lasts a long time, or the boars are hunted down to the point where they can no longer sustain a sufficient population to feed both islands, then the food island loses the ability to support the needs of both islands, and starvation eventually thins the population of both islands.
How might a surplus of food have helped civilizations advance from hunter - gatherer societies?
A surplus of food came from farming, and this surplus provided the means to go beyond a struggle for survival to being able to divert resources to cultural activities and so begin the process of civilisation.
How might a surplus of food have helped civilizations advance from hunter-gathered societies?
A surplus of food came from farming, and this surplus provided the means to go beyond a struggle for survival to being able to divert resources to cultural activities and so begin the process of civilisation.
How were the hunter gatherers different from a civilization?
Civilisation requires a surplus to provide time for civilised activity to be carried out - beyond the daily struggle for food for survive. Settled peoples can produce this surplus of food and time.
What did humans have to learn in order to have civilizations?
To produce enough food to provide a surplus to spend on things beyond mere survival.
Why rivers are impact to civilization?
Their fertile valleys provide the means to provide a food surplus. Such a surplus enables a diversion of some of it to promote something beyond mere daily subsistence. They also provide a water road for communications and trade.
What allowed Egyptians to flourish as a culture?
he productivity of the Nile valley provided a surplus which could enable the development of culture beyond a mere struggle for survival.
