Use the U.S. current account balance and international investment position to explain the relationship between the current account balance and the international investment position

What will be an ideal response?

For many years, the U.S. international investment position was positive. The large current account deficits of the 1980s, 1990s, and 2000s have eroded the United States' investment position from a positive $288.6 billion in 1983 to zero in 1989, and negative since then. Each year a country experiences a current account deficit, foreigners acquire more assets inside its boundaries than its residents acquire abroad, and the international investment position shrinks further. Thus a current account deficit in a given year does not imply that the international investment position is negative, but sustained current account deficits must eventually lead to a negative international investment position.