What would economies like India, which have persistent current account deficit experience?
Answer & explanation
Correct answer: option 1
The correct answer is option 2: Decreased demand for domestic goods and services in their country.
Economies with a persistent current account deficit experience an excess of imports over exports, meaning they are spending more on foreign goods and services than they are earning from exports. A persistent current account deficit often reflects that the country is importing a lot, which means there is a higher demand for foreign goods and services compared to domestic goods and services.