[zoxe]

Could anyone tell me what would happen to the current account if the minimum wage was increased? Also, drawing a diagram for the minimum wage increasing, would the AS or AD curve shift & why?

[Zalachenko]

If the minimum wage is increased, consumers will have more disposable income available, therefore this will boost consumption (both nationally and internationally). AD would shift outwards - remember the components of AD? Regarding the current account, I'd say it depends on both domestic and foreign prices.

[MagicNMedicine]

Well this depends on whether the minimum wage was raised above the market clearing wage (and it is assuming that all labour gets paid the same wage which is a simplification), if it is then costs for firms raise so this is an upward shift of the AS curve which will raise price level and reduce equilibrium output level.

As regards the current account it may result in the current account balance worsening as domestic goods in tradeable sectors that directly compete with foreign goods, will now be more expensive because of the additional costs (assuming wages in foreign countries stay constant), so exports will fall, also imports would rise because domestic consumers would now find foreign goods cheaper as the price of domestic goods had risen when foreign goods were the same price.