Factors affecting the Current Account

What is the national debt defined as?

The cumulative stock of outstanding central government borrowing.

What can consistent overspending indicate in an economy?

It may indicate that consumers and governments are relying on borrowing from abroad.

What two options are available for countries with excessive government borrowing?

1. Refuse to pay off debts and be cut off from the world financial system.

2. 2. Cut back domestic spending to create a current account surplus.

Name one prominent factor that affects the balance of payments in a country.

Natural resources.

How can a fast-growing economy influence investment abroad?

A fast-growing economy will invest throughout the world, exporting capital, which creates a deficit.

What role does natural resource abundance play in a country's economy?

• size of a country’s natural resources, relative to the size of the population will impact how much they can use the resources without having to spend the money on imports.

How does inflation relative to other countries affect a nation's economy?

Inflation can influence productivity and underlying competitiveness.

What is the relationship between economic growth and foreign direct investment (FDI)?

Impressive economic growth attracts inward FDI, where international businesses invest in the economy.

Which countries are examples of having abundant natural resources compared to their populations?

Norway and Saudi Arabia.

What is the forgetting curve in relation to newly learned information?

It represents the decline in memory retention over time unless information is reviewed.