Question : Which of the following is not a factor that affects the current account balance?
Option 1: Trade policies
Option 2: Exchange rates
Option 3: Domestic inflation rates
Option 4: Domestic interest rates
Correct Answer: Domestic interest rates
Solution : The correct answer is (d) Domestic interest rates
While domestic interest rates can indirectly influence the current account balance through their impact on other factors, they are not a direct determinant of the current account balance. The current account balance is primarily affected by factors such as trade policies, exchange rates, and domestic inflation rates.
However, it's important to note that interest rates can indirectly influence the current account balance through their impact on factors such as exchange rates and investment flows.
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