The late economist Herbert Stein described the accounts that comprise a country's balance of payments:
A country is more likely to have a deficit in its current account the higher its price level, the higher its gross [domestic] product, the higher its interest rates, the lower its barriers to imports, and the more attractive its investment opportunities-all compared with conditions in other countries-and the higher its exchange rate. The effects of a change in one of these factors on the current account balance cannot be predicted without considering the effect on the other causal factors.
a. Briefly describe the transactions included in a country's current account.
b. Briefly explain why, compared to other countries, a country is more likely to have a deficit in its current account, holding other factors constant, if it has each of the following:
i. A higher price level
ii. An increase in interest rates
iii. Lower barriers to imports
iv. More attractive investment opportunities