Dangers of Current Account Deficit: The Case of the United States

Danilo Riza, Oswell Amihan


A current account is said to be in deficit if the overall value of imports of goods, services and investment income of a country outweighs the value of their expenditure. Another terms associated with current account deficit is balance of trade deficit but technically, trade deficit includes only exchange of goods  hence just a component of current accounts. A current account balance implies there is surplus on the financial and capital accounts for the country to offset.  There are often disagreements as to whether having a current accounts deficit is good or bad and under what circumstance a country should consider it as a threat. Understanding the challenges posed by current account deficit and the potential benefits can help to explain these intricate issue more clearly and this is done in subsequent sections.

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