Economic growth boosts imports, worsening the current account

Steps:

• Economic growth raises national income and consumer spending.
• Higher spending increases demand for imported goods and services.
• This leads to a larger trade deficit if exports don't rise proportionally.
• The current account balance deteriorates due to the import surge.

Why C is correct:

• By definition, current account balance = exports - imports; growth stimulates income, raising imports more than exports, creating a deficit per the balance of payments framework.

Why the others are wrong:

• A: Growth increases demand for raw materials, pushing prices up, not down.
• B: Growth expands output and jobs, typically lowering unemployment rates, including for youth.
• D: Growth heightens aggregate demand, intensifying demand-pull inflation, not reducing it.

Final answer: C