What does 'Account Deficit' mean?? Need some economics help...

[mAdD INDIAN]

Ok I gotta a few questions, I'm writing an essay on how the IMF does not help countries and only lends money to perpetuate its existence.

One of my points is how they force countries to change their economics policy in order to get a loan, however those policies screws the country over.

The example I'm giving is Argentina, I read that the IMF caused Argentia to reduce its account deficit, and in order for Argenita to cope with this, they increased their taxes which then cause the GDP to fall and made Argentia worse off. I was wondering if anyone had more info on that <since that was all i could get> and secondly, what does 'account deficit' mean??? I searched on Google, but I couldn't find a meaning for it.

Thanks.

 

[ThisIsMatt]

Wild guess, but wouldn't that just be their national debt?

 

[mAdD INDIAN]

I'm not sure...but thanks tho!

Anyone else?? There has to be some economists here!

 

[yakko]

I don't know but here is a bump.

 

[JayPatel]

heres what i could remember off the top of my head about the IMF and the world bank.

during bretton woods syste the IMFs role was to provide short term lending while the world bank provided long term lending. the bretton woods system collapsed and now both parties are adjusting its lending policies to closely follow one another. any country that borrows from the IMF must adopt a mandated macro economic policy which basically ends up being 2 things, anti-inflationary polcies and the secodn being massive reductions in government spending. the short term effect of this is a big decrease in demand. of course in the long run its going to be of benefit because these policies can promote economic growth and can actually increase demand which in turn result in opportunities.


anti inflationary policy, is basically restricting the increasing of a countries money supply in order to prevent inflation. print more money off means more money is floating around and its value as a rarity isnt as high, ppl splurge on spending which would cause increase demand on low supply goods, prices would rise. <--inflation

 

[Mister T]

a deficit is created when you spend more money that you receive.
That is how a national debt materializes.

Another example is the trade decifit. Importing more than you export.... thats a trade deficit.

 

[linuxboy]

one important note to remember about Argentina is that it's currency is pegged to the US dollar. That means that businesses borrow in US currency and what happens when the dollar is strong? That's right, our exports suffer because companies are forced to buy local to save money.

In the case of Argentina, since so many businesses were in debt, and could not export many goods and could npt sell goods in their domestic market, they defaulted on the loans. THe lack of exports is no goof since it creates an account deficit in the sence that money coming in != money going out, thus it needed to decrease demand for goods and thus stabilize the economy with an large influx of cash from the IMF. However, the problems are far worse off than economic theory would suggest and in this case, the Argentinian people were screwed over with an exacerbation of an already crumbling system.

hope that cleared things up

Cheers ! 🙂