current account surplus

• What should you watch before watching this video about current account surpluses?

  The video on current account deficits
• Why is a trade surplus closely linked to a current account surplus?

  The trade balance is the most significant part
• What are the two main categories of causes for a trade surplus?

  Demand side and supply side causes
• According to the text, what is one potential demand-side cause of a current account surplus?

  High incomes abroad
• How do high incomes abroad potentially lead to a current account surplus?

  They increase demand for our exports
• How do low incomes at home potentially lead to a current account surplus?

  It reduces demand for imports
• How does a weak exchange rate impact exports and imports?

  Imports become expensive, exports become cheap
• If a country's currency weakens, what happens to the demand for its exports?

  Demand for exports increases
• What is the main idea behind the supply side causes?

  Competitiveness gains
• What is one of the supply-side causes of a current account surplus mentioned in the text?

  Low relative inflation
• How does low relative inflation potentially lead to a current account surplus?

  Exports become more competitive
• What is considered as low labor costs in the context of supply-side economics?

  Low unit labor costs
• What factors can contribute to low unit labor costs?

  High productivity, weak unions, low minimum wages
• How does strong investment at home potentially lead to a current account surplus?

  Keeps prices low
• How does up-to-date technology help businesses?

  Lower costs of production
• What is a significant factor, unrelated to competitiveness, that can lead to a current account surplus?

  Gains in comparative advantage
• What does gaining a comparative advantage allow a country to do?

  Specialize and produce a lot of something
• What is another factor, besides comparative advantage, that can boost export revenues?

  New resource discoveries
• How do new resource discoveries impact export revenues?

  Increase export revenues
• What is a likely consequence of a country having a trade surplus?

  AD will rise
• How does a positive trade balance affect aggregate demand (AD)?

  It increases AD
• What are the likely effects on growth and unemployment from an increase in aggregate demand?

  Growth increases, unemployment decreases
• What potential inflationary pressure might be triggered by a current account surplus?

  Demand-pull inflation
• What direct impact might a current account surplus have on the exchange rate?

  Upward pressure, appreciation
• How does a stronger exchange rate potentially impact a current account surplus?

  May not be long-lasting
• What account must offset a current account surplus to balance payments?

  Financial account deficit
• How might a country run a financial account deficit to offset a current account surplus?

  Buy up debt of deficit countries
• What is a potential risk of holding large amounts of debt from countries with current account deficits?

  Worthless assets, financial difficulty
• What are some "dodgy ways" a country might achieve a current account surplus?

  Excessive protectionism, managing exchange rates
• What is a potential consequence of a country using protectionism to maintain a current account surplus?

  Retaliation, harmed international relations
• Why are large current account deficits problematic for other countries?

  Big problems are attached with them
• What is a potential sign of an unbalanced economy?

  A large current account surplus
• Why might a country overly reliant on exports be vulnerable?

  Lack of domestic consumer spending
• What might happen if the demand for exports reduces in a country overly reliant on them?

  There is no other avenue of growth
• According to the text, what is the ideal macro objective with trade?

  Balanced trade
• Why are excessive trade surpluses potentially problematic?

  They could bring issues
• What are some factors that lead to increased export competitiveness due to low unit labor costs?

  • High productivity
  • Weak trade unions
  • Low minimum wages
• What does it mean for the value of X-M if a country has a trade surplus?

  It will be positive