Why do current account deficits always match financial account inflows?
What will be an ideal response?
A country which runs a current account deficit must either sell assets to foreigners or borrow from foreigners. Hence, current account deficits must match financial account inflows. In other words, when a country makes net purchases of goods and services from foreigners, the country must make net asset sales to foreigners to pay the bill.
Economics
You might also like to view...
The money multiplier tends to be greater when
A) individuals hold less cash. B) individuals hold more cash. C) the reserve ratio increases. D) banks hold more excess reserves.
Economics
The deposit expansion multiplier would decrease if the Fed were to
A) raise the required reserve ratio. B) lower the required reserve ratio. C) lower the discount rate. D) buy bonds.
Economics