Why must the current account and the financial account sum to zero? (Assume the capital account is zero.)
What will be an ideal response?
The current account and the financial account must sum to zero because any excess demand for foreign currency that arises from transactions in goods and services (the current account) must be met by an excess supply of foreign currency arising from asset transactions (the financial account). A current account deficit is offset by a financial account surplus and vice versa.
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Industrial entrepreneurs like J.P. Morgan, Henry Ford and Andrew Carnegie were driven by desires to earn profits. In the process of pursuing these profits, American consumers were made better off
Indicate whether the statement is true or false
Based on the rising housing prices of 2000-2005, many buyers opted for interest-only loans and variable rate mortgages with little or no down payment because
a. they expected short-term interest rates to fall substantially in the future and this would reduce their monthly mortgage payment in the years ahead. b. variable rate mortgages are a good way to reduce the risk accompanying your investment when you plan to stay in the house for a long time. c. they thought housing prices would continue to rise and therefore they would be able to sell the house for a profit within a couple of years. d. they could easily recoup their investment, even if there was a downturn in housing prices in the future.