Author Question: How are the current account and the financial account related? What will be an ideal ... (Read 31 times)

MirandaLo · **on:** Jun 30, 2018

How are the current account and the financial account related?

What will be an ideal response?

Question 2

Foreign outsourcing is

A) the transfer of operations to foreign contractors.
B) an example of internalization.
C) an example of foreign direct investment.
D) currently illegal in the U.S.
E) the substitution of immigration for foreign direct investment.

InfiniteSteez · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

These two accounts are inversely related: the financial account is the flip side of the current account. When a country runs large deficits in its current account, it is financed by large surpluses in its financial account. In other words, when a country imports more than it exports, it must finance that deficit with a surplus of credits in its financial account.

Answer to Question 2

A