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Chapter 10: Q. 1 (page 265)

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

Short Answer

Expert verified

When foreign investors buy more U.S. stocks and bonds, the income receipts increase.

Step by step solution

01

Step 1. Meaning of current account balance.

The current account balance is a broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid.

02

Step 2. The feature in the current account balance.

When foreign investors buy more U.S. stocks and bonds, the income receipts increase. This increases because money is flowing into the United States and this increases the balance of trade.

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Most popular questions from this chapter

Why does a recession cause a trade deficit to increase?

Why does the trade balance and the current account balance track so closely together over time?

Some economists warn that the persistent trade

deficits and a negative current account balance that the United States has run will be a problem in the long run. Do you agree or not? Explain your answer.

In what way does comparing a country’s exports to GDP reflect its degree of globalization?

What is more important, a country’s current

account balance or GDP growth? Why?
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