Explain why economies with financial account surpluses usually have current account deficits
What will be an ideal response?
An economy will have a current account deficit if it is importing more than it is exporting in goods and services. This deficit must be financed by foreign investment in the economy (capital inflows) that exceeds capital outflows. As a result, the current account deficit must be accompanied by a financial account surplus.
You might also like to view...
Assume the marginal propensity to consume is 0.8. If consumer spending increases by $20 billion, then real GDP will
A. decrease by $100 billion. B. increase by $16 billion. C. increase by $100 billion. D. not change.
A $1 million increase in investment spending will raise equilibrium output (real GDP) by:
a. less than $1 million. b. exactly $1 million. c. between $0.5 and $1.5 million. d. more than $1 million.
Using the aggregate demand and aggregate supply model, a decrease of what curve is by itself consistent with the changes in prices and output that occurred during the onset of the Great Depression?
Dana spends $10,000 on remodeling a storefront that she then opens as a shoe store. The business has not been very successful, and she needs an additional $3,000 to keep the shoe store open. Which of the following is true?
A. The $10,000 Dana spent on remodeling is a fixed cost of her business. B. The $10,000 Dana spent on remodeling represents a part of the total variable cost of her business. C. The $3,000 Dana needs to keep the deli open represents her total fixed costs. D. The $3,000 represents her marginal costs of production.