Economics HL
Economics HL
4
Chapters
117
Notes
Unit 1 - Intro To Econ & Core Concepts
Unit 1 - Intro To Econ & Core Concepts
Unit 2 - Microeconomics
Unit 2 - Microeconomics
Unit 3 - Macroeconomics
Unit 3 - Macroeconomics
Unit 4 - The Global Economy
Unit 4 - The Global Economy
IB Resources
Unit 4 - The Global Economy
Economics HL
Economics HL

Unit 4 - The Global Economy

Effective Strategies To Correct Current Account Deficits

Word Count Emoji
604 words
Reading Time Emoji
4 mins read
Updated at Emoji
Last edited onΒ 5th Nov 2024

Table of content

Hello Economics Explorers! πŸš€

Buckle up, as we're about to embark on a thrilling journey through the world of persistent current account deficits. This might sound like a tricky puzzle, but don't worry; we'll decode it together using real-world examples.

The puzzle- persistent current account deficit 🧩

Think of a country's current account like a checking account. A deficit means the country is buying more from other countries than it's selling. That's like spending more on online shopping than you earn from your part-time job. Let's figure out how countries can fix this!

Expenditure-reducing policies

Definition and Methods

  • Contractionary Fiscal Policy: Decreasing government spending (G) and/or increasing taxes (T).
  • Tighter Monetary Policy: Raising interest rates.

Impact and Example

  • Reduces National Income (Y): People buy fewer imported goods.
  • Lowers Inflation: Makes exports more competitive.
  • Drawback: May lead to a recession.

Imagine you're on a shopping spree. If your parents decrease your allowance (like decreasing G) or increase your chores (like increasing T), you'll spend less, right? Similarly, these policies make a country spend less on imports.

Expenditure-switching policies

Devaluing the Currency

  • Makes imports more expensive and exports cheaper.
  • Drawback: May increase inflation.

Protectionism

  • Implementing tariffs and trade barriers.
  • Drawback: Causes inefficiency, may lead to retaliation from other countries.

Imagine if the new Xbox becomes more expensive in your country but cheaper abroad. You might buy a locally made gaming console instead, while people in other countries buy more Xboxes from your country. That's how devaluing the currency works.

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IB Resources
Unit 4 - The Global Economy
Economics HL
Economics HL

Unit 4 - The Global Economy

Effective Strategies To Correct Current Account Deficits

Word Count Emoji
604 words
Reading Time Emoji
4 mins read
Updated at Emoji
Last edited onΒ 5th Nov 2024

Table of content

Hello Economics Explorers! πŸš€

Buckle up, as we're about to embark on a thrilling journey through the world of persistent current account deficits. This might sound like a tricky puzzle, but don't worry; we'll decode it together using real-world examples.

The puzzle- persistent current account deficit 🧩

Think of a country's current account like a checking account. A deficit means the country is buying more from other countries than it's selling. That's like spending more on online shopping than you earn from your part-time job. Let's figure out how countries can fix this!

Expenditure-reducing policies

Definition and Methods

  • Contractionary Fiscal Policy: Decreasing government spending (G) and/or increasing taxes (T).
  • Tighter Monetary Policy: Raising interest rates.

Impact and Example

  • Reduces National Income (Y): People buy fewer imported goods.
  • Lowers Inflation: Makes exports more competitive.
  • Drawback: May lead to a recession.

Imagine you're on a shopping spree. If your parents decrease your allowance (like decreasing G) or increase your chores (like increasing T), you'll spend less, right? Similarly, these policies make a country spend less on imports.

Expenditure-switching policies

Devaluing the Currency

  • Makes imports more expensive and exports cheaper.
  • Drawback: May increase inflation.

Protectionism

  • Implementing tariffs and trade barriers.
  • Drawback: Causes inefficiency, may lead to retaliation from other countries.

Imagine if the new Xbox becomes more expensive in your country but cheaper abroad. You might buy a locally made gaming console instead, while people in other countries buy more Xboxes from your country. That's how devaluing the currency works.

Unlock the Full Content! File Is Locked Emoji

Dive deeper and gain exclusive access to premium files of Economics HL. Subscribe now and get closer to that 45 🌟

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