current account improvement

expenditure reduction vs. expenditure switching

current account deficit

the situation where a country imports more goods and services than it exports, leading to a net outflow from the country

expenditure reduction

policies aimed at reducing domestic spending including government spending cuts and higher taxes

expenditure switching

policies aimed at encouraging domestic consumers to switch their spending from imports to domestically produced goods and services

point one

expenditure reduction policies can reduce the current account deficit by reducing imports

point one explained

when domestic spending is reduced through policies such as government spending cuts or higher taxes, it can lead to a reduction in imports as consumers have less money to spend on foreign goods and services

point one example

in the early 2010s, Greece implemented a series of austerity measures, including gov spending cuts and tax increases, in an effort to reduce its current account deficit

point one evaluation

it can be effective in reducing the current account deficit, but can also reduce economic growth, living standards and investment