The US typically imports (M) more goods and services than it exports (X). a. Explain what this means for both the US Current Account (CA) and Capital Account (aka the Financial Account) and how the US net International Investment Position (IIP) will be affected. b. Why is a CA deficit referred to as an “excess spending” problem? Who is the US borrowing from when it engages in this “excess spending”? [Hint: use the twin-deficit identity.]
The US typically imports (M) more goods and services than it exports (X). a. Explain what this means for both the US Current Account (CA) and Capital Account (aka the Financial Account) and how the US net International Investment Position (IIP) will be affected. b. Why is a CA deficit referred to as an “excess spending” problem? Who is the US borrowing from when it engages in this “excess spending”? [Hint: use the twin-deficit identity.]
Chapter1: Making Economics Decisions
Section: Chapter Questions
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The US typically imports (M) more goods and services than it exports (X).
a. Explain what this means for both the US Current Account (CA) and Capital Account (aka the Financial Account) and how the US net International Investment Position (IIP) will be affected.
b. Why is a CA deficit referred to as an “excess spending” problem? Who is the US borrowing from when it engages in this “excess spending”? [Hint: use the twin-deficit identity.]
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