Chapter 35

Chapter 35 - o Foreign direct investment outward FDI o...

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Chapter 35 The balance of payments The current account Records payments and receipts arising from international trade in goods and services: Trade account Capital service account – transactions that take place make payments or receive payments, to service capital (i.e. interest) Debit item – payment of money from Canada Credit item – receipt of money for Canada The capital account Records payments and receipts arising from trade in long-term and short term assets
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Unformatted text preview: o Foreign direct investment outward FDI o Portfolio investment o Includes purchases of foreign currency by the government or central bank Debit item purchase of assets by Canada Credit item sale of assets by Canada Balance of payments must balance Let the CA be the current account balance, the KA be the capital account balance: o Balance of Payments = CA + KA = 0 Consider a CA surplus...
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