Current account all transactions that are settled

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Current account: all transactions that are settled currently Goods and services   what’s most important about the  current account Current income from investment Gifts Capital account: transactions that involve real and financial  assets Ex. Real estate in Canada, stock in a European firm
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Also includes financial derivatives o Deficit vs. surplus Balanced account Payments flowing out = payments flowing in  Exactly offset Deficit: More funds flowing out than in Payments flowing out > payments flowing in We’re spending more on imports than people around the  world are spending on our exports The US has a current account deficit (trade deficit in  goods and services) Trade deficit is not necessarily something we should fear Surplus Payments flowing out < payments flowing in U.S. has a capital account surplus o BOP identity Each account can be in deficit or surplus, but they must balance o Causes  What causes a trade/current account deficit? Why do we buy more goods from ROW than they buy from us? What causes a capital account surplus?  Why does ROW send more investment funds to US than we  send to them? 1. Strong economic growth Rich in global terms Can afford to buy other people’s things and other  people want to invest in us 2. Low personal savings Have to borrow from around the world 3. Fiscal policy We don’t save much and our government borrows  a lot so funds from the global market must come in  to feed out national debt
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23 April 2013 03/06/2013 14:37:00
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03/06/2013 14:37:00
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03/06/2013 14:37:00
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