Economics • Indian EconomyEasy
In the context of the Indian economy, what does the 'Current Account Deficit (CAD)' signify?
A. The country spends more on imported goods, services, and transfers than it earns from exports.✓ Correct Answer
B. The government's total budget expenditures exceed its tax revenues during a fiscal year.
C. Foreign direct investment outflows surpass total foreign institutional inflows.
D. Domestic credit creation by commercial banks exceeds total central bank reserves.
💡 Solution & Explanation
The Current Account Deficit measures the shortfall where the aggregate value of imported goods, services, and net transfer payments exceeds total export earnings during a specific period. Incorrect options confuse this international trade metric with domestic fiscal deficits or capital account imbalances. Monitoring the current account is vital for assessing macroeconomic stability and foreign exchange reserves.
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