Edexcel IGCSE Economics (4EC1) · Section D: The Global Economy
Specification points
- The current account of the balance of payments.
- Economic development and how it is measured.
- Factors influencing development.
The current account
The balance of payments records a country's transactions with the rest of the world. The current account records trade in goods and services (plus income and transfers).
- A deficit means imports exceed exports — money flows out.
- A surplus means exports exceed imports — money flows in.
Imports > exports → current account deficit. Exports > imports → surplus.
Policies to reduce a deficit include depreciation (cheaper exports), reducing demand, and improving competitiveness through supply-side policies.
Economic development
Development is broader than growth — it means higher living standards, health, education and quality of life.
- GDP per person (PPP) measures material living standards.
- The Human Development Index (HDI) combines income, health (life expectancy) and education.
Key definitions
| Term | Definition |
|---|---|
| Current account | The record of trade in goods, services, income and transfers. |
| HDI | A measure combining income, health and education. |
| Developing country | A country with relatively low income and living standards. |
Factors influencing development
Natural resources, investment in capital and infrastructure, education and health, trade, political stability, and access to finance. Barriers include reliance on one commodity, debt, poor infrastructure, conflict and rapid population growth.
Worked example
A developing country runs a current-account deficit because its exports are uncompetitive and it imports manufactured goods. Investing in education and infrastructure raises productivity and competitiveness over time, improving both the current account and its HDI — but this requires funding the country may lack.
Common exam mistakes
- Confusing a deficit (imports > exports) with a surplus.
- Equating development (living standards) with growth (output) alone.
Exam technique
Explain the current-account balance and its causes, then use the HDI and specific factors to discuss development.
Quick revision
- Current account: goods, services, income, transfers; deficit = imports > exports.
- Development measured by HDI (income, health, education), not just GDP.
- Factors: investment, education, trade, stability; barriers: debt, commodity dependence.