Explain what is meant by a Current Account Deficit and why is it considered 'bad' to have an increasing CAD? The Current Account Deficit generally means that our nation is spending more than it earns. This means that we have to borrow from other countries in order to pay for the things we purchase (imports). When we borrow from them we have to pay interest rates and these are additions to the original debt, therefor …
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showed last 75 words of 851 total
…also increase interest rates and decrease the money supply and then credit would become expensive, discouraging forms to invest. A reduction in investment means a reduction on imports. The microeconomics reform is another way to decrease the current account deficit in Australia. This means that if industry became more efficient and aware, it would have better organization of production and distribution. This would mean we had less chance of creating a large current account deficit.