Explain the three components of the balance of payments accounts. What must these three balances sum to?
What will be an ideal response?
The balance of payments has three sections: the current account, the capital and financial account, and the official settlements account. The current account keeps track of transactions in goods and services as well as net interest and net transfers. It equals exports minus imports plus net interest plus net transfers. The capital and financial account keeps a record of investment. It equals foreign investment in the United States minus U.S. investment abroad. The official settlements account keeps track of changes in U.S. official reserves. The sum of the three balances must equal zero.
You might also like to view...
According to the principle of comparative advantage, a nation should specialize in economic activities
A. for which it has an absolute advantage. B. for which it has no absolute advantage. C. that incur lower opportunity costs. D. that incur higher opportunity costs.
Which statement is TRUE about a comparison of economic freedom with political freedom?
A) Economic freedom is more important than political freedom when considering positive economic growth. B) Economic freedom leads to positive economic growth while political freedom leads to negative economic growth. C) Political freedom is more important than economic freedom when considering positive economic growth. D) Economic freedom cannot exist without political freedom.
Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?
a. P > ATC b. P = ATC c. P < ATC d. Any of the above could be correct.
After 2012 when the U.S. economy recovered,
a. the budget deficits shrank, and the increases in the debt-to-GDP ratio became larger. b. the budget deficits grew, and the decreases in the debt-to-GDP ratio became larger. c. the budget deficit shrank, and the increases in the debt-to-GDP ratio became smaller. d. the budget deficits grew, and the decreases in the debt-to-GDP ratio became smaller.