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External analysis – economic factors

7.6 Managing the balance of trade

Why we want to avoid a Why we want to avoid a
long term deficit long term surplus

 It will have to borrow money to fund  A long-term trade surplus can
the deficit, resulting in extra interest cause significant inflationary
payments. pressures.

 The alternative is to sell assets.  A long term surplus is presumably
at the expense of other countries'
 There will be pressure on the deficits.
country's currency to depreciate

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