Question

Assuming that the volume effect outweighs the value, the current

account will increase if:
A. disposable income increases.
B. the real exchange rate increases.
C. domestic prices fall.
D. exports fall

Answer 1

The current account will increase if domestic prices fall and the country exports more goods.

Step-by-step explanation:

The current account will increase if domestic prices fall.

When the domestic prices fall, goods in the country will be relatively cheaper compared to goods in other countries. As a result, U.S. exports will become more competitive and demand for them will increase. This will lead to an increase in export sales, which will have a positive impact on the current account.

On the other hand, if exports fall, it would have a negative effect on the current account, as it means that the country is selling fewer goods to other nations.