Chapter 10, Problem 1SCQ

If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?

To determine

The details in the current account if foreign investors buy more U.S. stocks and bonds are to be determined.

Answer to Problem 1SCQ

Their dividend and interest will be part of imports.

Explanation of Solution

If any country buy the U.S. Bonds and Stocks, that will be a part of the financial account. The dividend from stocks and interest from bonds will be a part of imports and become negative, as imports are negative in current account rather than positive like exports.

Economics Concept Introduction

Current account: It is one of the component of balance of payments .It consists of imports, exports, net income from abroad and net cash payments