Export Productivity Drives Current Account Surplus Steps: - Note the current account shifted from a US$1.6 bn deficit in 2011 to a US$0.7 bn surplus in 2016, indicating improved net exports or income flows. - Current account balance = exports - imports + net income from abroad + net transfers; surplus requires exports to outpace imports. - Evaluate factors: currency changes affect trade competitiveness, income growth influences import demand, tariffs impact import costs, and productivity boosts export supply. - Conclude that export sector enhancements directly increase export volumes and value, improving the balance. Why D is correct: - Productivity improvements lower production costs and raise output efficiency, making exports more competitive and increasing their volume per the law of comparative advantage, thus boosting the trade surplus component of the current account. Why the others are wrong: - A: Currency appreciation raises export prices abroad and lowers import costs, reducing net exports and worsening the current account. - B: Higher household incomes increase demand for imported goods, raising imports and deteriorating the current account balance. - C: Lower import tariffs reduce …