Current Account Deficit Worsens from Reduced Income Inflows

Steps:

• Identify current account components: trade in goods/services, primary income (e.g., interest), and transfers.
• Note deficit rises when credits (inflows) fall or debits (outflows) rise.
• Evaluate options: Focus on primary income for interest-related changes.
• Select B as it directly reduces income credits, widening the deficit.

Why B is correct:

• Primary income credits include interest from overseas investments; a fall decreases inflows, reducing the current account balance per IMF balance of payments manual.

Why the others are wrong:

• A: Foreign direct investment affects the capital/financial account, not current account.
• C: Lower import value reduces debits, improving (not worsening) the current account.
• D: Higher tourism revenue boosts service credits, improving the current account.

Final answer: B