In a slumping economy, imports decrease, but exports may hold steady. Another way in which the business cycle is related to the current account is that measure taken to address business cycle issues, such as trade barriers, subsidies or exchange rate policy can impact the current account by altering the balance of trade. However, it would take a substantial change in the business cycle in order to affect the current account at this point. The country would need to reduce imports dramatically, as happened in Argentina following their currency collapse. Regular business cycle shifts will impact the current account but the deficit is presently so large that it these impacts will not reverse the current trends unless the change in the business cycle is catastrophic.

What is the relationship between a country's net financial inflows & its current account?

The relationship between the net financial flow and the current account...
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