For many years now the United States has been running large current account deficits. What do you know about the capital account for the United States and what you predict for the exchange rate in the future? Explain.
What will be an ideal response?
The current account deficits imply that the United States must be running capital account surpluses for many years. The capital account and the current account, when summed, equal zero. This indicates that the U.S. is a net seller of assets. The large current account deficits should result in a depreciation of the dollar. This is one of the adjusting mechanisms that tend to bring the current account eventually into balance.
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A. lower its price. B. earn smaller profits or larger losses. C. expand its output. D. earn greater profits or smaller losses.
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