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Question
1. If there is a fall in gross domestic product, will each of the following economic variables rise, fall or not be affected?
The deficit on the current account of the balance of payments FallHello sir, please help me with this query.
I dont understand why the deficit will fall if there is a decrease in GDP. Should it not rise instead?If the GDP falls, the population is less well off. All consumption will fall irrespective of whether the goods and services are created domestically or are imported.
However, exports should not be affected as they depend on foreign consumption.
So imports down but exports the same. Therefore, the foreign exchange deficit (current account deficit) will fall.
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