Question : Which of the following is not a factor that affects a country's current account balance?
Option 1: Exchange rates
Option 2: Income levels
Option 3: Tariffs and trade barriers
Option 4: Domestic savings rates
Correct Answer: Tariffs and trade barriers
Solution : The correct answer is (c) Tariffs and trade barriers
Tariffs and trade barriers primarily affect a country's trade balance, which is a component of the current account balance. However, they are not factors that directly affect the overall current account balance. The current account balance is influenced by various factors such as exchange rates, income levels, and domestic savings rates. Exchange rates impact the competitiveness of exports and imports, income levels affect consumer spending on imports, and domestic savings rates influence the availability of funds for investment and borrowing from abroad.
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