Development and Growth Constraints - Trade Deficits
- Levels: A Level
- Exam boards: AQA, Edexcel, OCR, IB, Other
Some countries may experience large deficits on the current account of their balance of payments
- This means that the value of imported goods and services is greater than the value of exports and net investment incomes leading to an outflow of money from their economy.
- High trade deficits might have to be covered by foreign borrowing (increasing external debt) or a reliance on inflows of capital investment from overseas multinationals
- Large trade gaps can eventually lead to a currency crisis and possible loss of investor confidence.
- Capital flight is the uncertain and rapid movement of large sums of money out of a country
- There could be several reasons - lack of confidence in a country's economy and/or its currency, political turmoil or fears that a government plans to take privately-owned assets under state control
- Capital flight can lead to a loss of foreign currency reserves and put downward pressure on an exchange rate – driving the prices of essential imports of goods and services higher.
- Developing countries are estimated to have lost $5.86 trillion in 2001-2010 to illicit financial flows
You Might Also Like
8th December 2016
30th November 2016
11th June 2016
26th May 2016
17th May 2016
More From the Digital Store
This pack contains a full copy of the bumper collection of teaching & learning resources (print and digital) provided to delegates attending our recent Teaching the New Edexcel A Level Economics ...
Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.