b) Deficits and surpluses

b) causes of deficits and surpluses on the current account

in theory

• current account + capital/financial account = 0

• the sale/purchase of goods/services and the sale/purchase of assets must finance each other

causes of deficits and surpluses on the current account

• productivity

  • change in the cost per unit of output

  • change in market price

• product quality

• economic growth

  • increased firm revenue

  • increased household income

• exchange rate changes