« previous next »

Author Question: Explain why economies with financial account surpluses usually have current account deficits. ... (Read 134 times)

newbem

  • Hero Member
  • *****
  • Posts: 579
on: Jun 29, 2018
Explain why economies with financial account surpluses usually have current account deficits.
 
  What will be an ideal response?

Question 2

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?
 
  What will be an ideal response?


Beatricemm

  • Sr. Member
  • ****
  • Posts: 323
Reply #1 on: Jun 29, 2018
Answer to Question 1

An economy will have a current account deficit if it is importing more than it is exporting in goods and services. This deficit must be financed by foreign investment in the economy (capital inflows) that exceeds capital outflows. As a result, the current account deficit must be accompanied by a financial account surplus.

Answer to Question 2

The long-run effects differ from the short-run effects of an increase in aggregate demand because the long-run and the short-run aggregate supply curves differ. With a vertical LRAS, changes in AD only affect the price level, not real GDP. With an upward sloping SRAS, changes in AD impact both the price level and real GDP.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Chronic marijuana use can damage the white blood cells and reduce the immune system's ability to respond to disease by as much as 40%. Without a strong immune system, the body is vulnerable to all kinds of degenerative and infectious diseases.

Did you know?

Lower drug doses for elderly patients should be used first, with titrations of the dose as tolerated to prevent unwanted drug-related pharmacodynamic effects.

Did you know?

Patients should never assume they are being given the appropriate drugs. They should make sure they know which drugs are being prescribed, and always double-check that the drugs received match the prescription.

Did you know?

Acute bronchitis is an inflammation of the breathing tubes (bronchi), which causes increased mucus production and other changes. It is usually caused by bacteria or viruses, can be serious in people who have pulmonary or cardiac diseases, and can lead to pneumonia.

Did you know?

The liver is the only organ that has the ability to regenerate itself after certain types of damage. As much as 25% of the liver can be removed, and it will still regenerate back to its original shape and size. However, the liver cannot regenerate after severe damage caused by alcohol.

Hookup for testing fuel-pump current draw on any vehicle equipped with a fuel-pump relay. Hookup for testing fuel-pump current draw on any vehicle equipped with a fuel-pump relay.
Locations of Broca’s Area, Wernicke’s Area, and Associated Areas Involved in Language Deficits Locations of Broca’s Area, Wernicke’s Area, and Associated Areas Involved in Language Deficits
A mobile weather station that can be used to gather current weather data at the scene of hazardous ... A mobile weather station that can be used to gather current weather data at the scene of hazardous ...
Please fully explain in detail Please fully explain in detail
Flexible exchange rates are supposed to prevent long-term trade deficits. Flexible exchange rates are supposed to prevent long-term trade deficits.
You deposit $2000 each year into an account earning 4% interest compounded annually. How much ... You deposit $2000 each year into an account earning 4% interest compounded annually. How much ...
Video: How does an animal choose what food to eat?

For a complete list of videos, visit our video library