What are the main components of the current account? What has ...

[j.rubin]

What are the main components of the current account? What has been the recent U.S. experience with these items?
 
  What will be an ideal response?

Question 2

In the figure above, 10 percent of income in country A is distributed to the
 
  A) richest 10 percent of the households.
  B) poorest 10 percent of the households.
  C) richest 30 percent of the households.
  D) poorest 30 percent of the households.

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Answer to Question 1

The current account records payments for the imported of goods and services and the receipts for exported of goods and services. These two components of the current account are by far the largest components. In addition to the value of imports and exports, the current account also includes the net interest income paid abroad and net transfers. Net interest income measures the interest payments both made and received which flow from previously purchased assets. Net transfers record such items as foreign aid payments.
Over recent years, the U.S. current account has been negative, that is, there has been a current account deficit. Over these years, the United States has experienced a perennial trade deficit, which means that the value of imports has exceeded the value of exports. The trade deficit has been the primary cause why the U.S. current account has been negative. Net interest income has been barely negative while net transfers are also negative and slightly larger in magnitude than net interest income.

Answer to Question 2

D

[j.rubin]

Gracias!

[debra928]

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