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Chapter 10: Q 40. (page 267)

What is more important, a country’s current

account balance or GDP growth? Why?

Short Answer

Expert verified

GDP growth is more important.

Step by step solution

01

Step 1. Definition

Gross domestic product refers to te value of all the finished goods and services manufactured in a fixed time period.

02

Step 2. Explanation

Because GDP represents the health of an economy so it is more important. Higher GDP means improvement in the economy, high employment, higher rates of wages and in negative GDP opposite of this will happen.

The current account balance tells us that the economy is in trade surplus or trade deficit but it doesn’t talk about the health of the economy. So that’s why GDP growth is comparably more important than the current account balance.

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Most popular questions from this chapter

Does a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?

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following situation: a government budget deficit of \(100 billion, total domestic savings of \)1,500 billion, and total domestic physical capital investment of \(1,600 billion. According to the national saving and investment identity, what will be the current account balance? What will be the current account balance if investment rises by

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