Question

A low home inflation rate relative to other countries would ____ the home country's current account balance, other things being equal. Low growth in the home income level relative to other countries would ____ the home country's current account balance, other things being equal

Answer 1

Answer:

Increase; increase.

Explanation:

Inflation can be defined as the persistent rise in the price of goods and services in an economy.

A low home inflation rate relative to other countries would increase the home country's current account balance, other things being equal. Low growth in the home income level relative to other countries would increase the home country's current account balance, other things being equal. A country's current account balance is a statement of the value of its exports and imports of goods and services at a specific period of time.

Hence, when the level of inflation is low in a particular country; their current account balance would be high. However, when the level of inflation is high it results in low growth and as such increases the home country's current account balance, other things being equal.