Part 1 of Essay
a) Explain what is meant by a Current Account Deficit and why is it considered 'bad' to have an increasing CAD? The Current Account Deficit generally means that our nation is spending more than it earns. This means that we have to borrow from other countries in order to pay for the things we purchase (imports). When we bor ....

Part 2 of Essay
.... experiencing a sustained current account deficit for many reasons. These reasons include: high interest rates, worsening terms of trade, high consumer spending and less saving, inflation, variations of the exchange rate, freight and tourism and international competitiveness. The first reason is the fact that interest rates on existing debt are high as well as the fact that we don't save enough, adds a considerable cost onto the final debt. Higher interest rates drive us further into debt than we began with, lea ....