Why do current account deficits always match financial account inflows?
What will be an ideal response?
A country which runs a current account deficit must either sell assets to foreigners or borrow from foreigners. Hence, current account deficits must match financial account inflows. In other words, when a country makes net purchases of goods and services from foreigners, the country must make net asset sales to foreigners to pay the bill.
You might also like to view...
Refer to Scenario 10.9. At the profit maximizing level of output, what is the level of producer surplus?
A) 0 B) 1,800 C) 5,400 D) 7,200 E) 9,600
Which of the following transactions is not a source of funds for Country A?
a. Exports from Country A. b. Increases in Country A's central bank reserve assets. c. Dividends Country A receives from foreign nations. d. Country A's borrowing from foreign banks. e. Aid Country A receives from the rest of the world.
The true burden of a payroll tax has nothing to do with the percentage of the tax that employers are required to pay
a. True b. False Indicate whether the statement is true or false
What is money’s primary function?
a. to act as a medium of exchange b. to be a store of value c. to allow for deferred payments d. to act as a unit of account