Current account deficit and Unemployment
Why might a current account deficit result in an increase in unemployment?
If we apply this to the UK. A current account deficit refers to when the volume of imports > volume of exports. Therefore you are buying more goods from foreign firms as opposed to from domestic firms. This will lead to unemployment rising due to lack of demand for domestic goods.
That's the only real reason i can think of. It doesn't really explain how unemployment arises from a current account deficit but I don't think it actually does for a current account deficit would lead to a depreciation of the pound and hence demand for exports would rise leading to unemployment actually falling.
That's the only real reason i can think of. It doesn't really explain how unemployment arises from a current account deficit but I don't think it actually does for a current account deficit would lead to a depreciation of the pound and hence demand for exports would rise leading to unemployment actually falling.
What Henry said is correct, unemployment arrises from a current account deficit due to the lack of demand for domestic goods and services. Here in the UK there is high demand for invisible services, like our financial services, but hardly any demand for cheap visible goods, for instance clothing. In the UK, we specialise in high quality and expensive goods like pharmaceuticals, aircraft engines etc.. Not the cheaper goods the likes of China can produce. One reason for this may be the implication of the minimum wage here in the UK.
Good Luck!!
Good Luck!!
Quick Reply
Related discussions
- economics - macro
- AQA A Level Economics Paper 2 (7136/2) -22th May 2023 [Exam Chat]
- CIE A Level Economics
- Can't think of one
- economics - macro
- sudden change in parental income not reflected on sfe forms
- Post Your Economics Question Here
- Early Student Loan for Studying Abroad?
- Is University of kent going to crSH AND BURN AFTER MORE ROUNDS OF REDUNDANCIES
- Questions about height
- The north of England should separate from the south
- Edexcel A Level Economics A Paper 3 (9ECO 03) - 5th June 2023 [Exam Chat]
- Shock and awe- interest rates and pension reform; is there a different way?
- Muscle or weight ??
- The man who mistook his wife for a hat
- How am I gaining weight
- A Level Edexcel Economics B Paper 1 (9EB0 01) 2023 [exam chat]
- Will the calories effect my growth
- 14 years old and currently 82.6kgs
- Capacitance
