Explain How Fiscal Policy May Increase the Current Account Deficit

question 43

Essay

Explain how fiscal policy may increase the current account deficit.Explain how it may decrease the current account deficit.

---

Definitions:

Perpetual Inventory System

The inventory system in which each purchase and sale of merchandise is recorded in the inventory account and related subsidiary ledger; therefore, the inventory records are updated continuously.

Conversion Cost

The combined cost of direct labor and manufacturing overheads which are incurred to convert raw materials into finished goods.

Direct Materials

Initial materials specifically allocated for the making of certain goods or provision of services.

Factory Overhead

Indirect manufacturing costs not directly associated with the production of goods, such as depreciation of equipment, maintenance, and utilities.