Holding other factors constant, a country is more likely to have a deficit in its current...

 

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Holding other factors constant, a country is more likely to have a deficit in its current account when there are more attractive investment opportunities, because those interested in the investment opportunities need to U.S. dollars, thereby the demand for dollars and the exchange rate (foreign currency/dollar). It will take foreign currency to buy one dollar, so purchasing U.S. goods is expensive. This will exports and imports, thus creating a negative balance of trade and a deficit in its current account. Holding other factors constant, a country is more likely to have a deficit in its current account when there are more attractive investment opportunities, because those interested in the investment opportunities need to U.S. dollars, thereby the demand for dollars and the exchange rate (foreign currency/dollar). It will take foreign currency to buy one dollar, so purchasing U.S. goods is expensive. This will exports and imports, thus creating a negative balance of trade and a deficit in its current account.

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