Q. Consider the following economic activities:

1. Outsourcing of goods production to foreign countries
2. Outsourcing of services to foreign countries
3. Increase in domestic tourism spending
4. Increase in foreign tourist arrivals

Which of the above activities would contribute to increasing the deficit in a country's current account?
Answer: Only 1 and 2
Notes: Outsourcing goods and services to foreign countries (statements 1 and 2) increases payments made abroad, thereby worsening the current account deficit. Domestic tourism spending (3) does not affect the current account, as funds remain within the economy. Increase in foreign tourist arrivals (4) actually improves the current account by bringing foreign currency into the country.