The uk has had a persistent current account deficit since the mid 1980s policies to reduce a current account deficit 1 devaluation also higher interest rates will cause a fall in ad and therefore reduce economic growth this will reduce inflation and help to make uk exports more competitive. What is certain is that the cuts will reduce economic growth the government is fond of scaring us with numbers heres our own scary number the spending review will depress growth in the uk economy by 60 billion according to official figures thats 1000 for everyone in the uk so the best way to cut the deficit is to encourage growth. Other policies to reduce a trade deficit 1 supply side policies these policies aim to improve the productivity and competitiveness of the economy making uk exports more competitive and attractive this helps increase exports 2 deflationary fiscal policy this involves higher tax and lower government spending. How reducing our deficit can help our economy by larry swedroe 1980 2005 looking at those designed to reduce a budget deficit and to put the public debt on a sustainable path . Economic recovery will help reduce the deficit but discretionary policy tightening is also needed full print version including charts and tables pdf 134 kb reducing the budget deficit will be the central economic challenge of the new parliament
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