Unformatted text preview: • CA = –$811 billion. KA + FA =+$800 billion. • Difference: statistical error. • U.S. trends for BOP items. • Since 1990, U.S. current account deficit has grown. • CA deficit financed through borrowing from abroad (FA surplus). • Microeconomic View • Each transaction in the balance of payments must involve a BOP credit and a BOP debit. • Why? Every market transaction involves two parts: • If party A engages in a transaction with party B, then A receives from B an item of given value. • In return, B receives from A an item of equal value. • Microeconomic View • BOP credit items • Current account (CA) • Exports of goods and services (+EX) • Exports of factor services (+EX FS ) • Unilateral transfers received (+UT IN ) • Financial account (FA) • Exports of home and foreign assets (+EX H A , + EX F A ) • Capital account (KA) • Capital transfers received (+KA IN ) • Microeconomic View...
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- Spring '10
- Economics, capital account, net borrower, Microeconomic View