Unformatted text preview: es [balance on goods and services]
Services • 3. Net investment income [interest, dividend, & profit income]
Net • 4. Net transfers [foreign aid, pensions, money sent back home, etc.]
• The Capital and Financial Account includes three items:
1. Balance on capital account [net “debt forgiveness”]
2. Foreign purchases of U.S. assets [real or financial] in the U.S.
3. U.S. purchases of foreign assets [real or financial] abroad.
The difference between these two accounts is the “balance of payments.”
They should balance.
If not, official reserves will be used to balance them.
• [a + here means we will export a stock of foreign money ($’s will enter the U.S.)]
[a – here means we will import a stock of foreign money ($’s will exit the U.S.)]
import • [If you bought a parachute from a factory in Germany–Current Account]
[If you bought a parachute factory in Germany – capital...
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This note was uploaded on 07/20/2012 for the course ECON 2106 at GCSU.