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    If rate of inflation is rising what is the effect to balance of payments on current account? How about when it falls?
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    If inflation increases, then this means that there is a sustained increase throughout the whole price level. This will decrease the competitiveness of the UK. Hence countries will import less from the UK. Therefore there will be a deficit (imports will be greater than exports)

    It's been a while since i looked at an Economics book so i apologise if the answer's wrong.
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    (Original post by G4ry)
    If inflation increases, then this means that there is a sustained increase throughout the whole price level. This will decrease the competitiveness of the UK. Hence countries will import less from the UK. Therefore there will be a deficit (imports will be greater than exports)

    It's been a while since i looked at an Economics book so i apologise if the answer's wrong.
    I wouldn't say deficit unless there was data to back it up, however i would use the terms 'deterioration', and 'improvement' rather than surplus.
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    (Original post by RobinHood)
    I wouldn't say deficit unless there was data to back it up, however i would use the terms 'deterioration', and 'improvement' rather than surplus.
    Yeah, that would be correct. I just typed quite quickly that's all. It's been a while since i looked at it, and i have to do a degree in this next year :eek:
 
 
 
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