« previous next »

Author Question: Explain why economies with financial account surpluses usually have current account deficits. ... (Read 161 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?

According to the American College of Allergy, Asthma & Immunology, more than 50 million Americans have some kind of food allergy. Food allergies affect between 4 and 6% of children, and 4% of adults, according to the CDC. The most common food allergies include shellfish, peanuts, walnuts, fish, eggs, milk, and soy.

Did you know?

It is widely believed that giving a daily oral dose of aspirin to heart attack patients improves their chances of survival because the aspirin blocks the formation of new blood clots.

Did you know?

For pediatric patients, intravenous fluids are the most commonly cited products involved in medication errors that are reported to the USP.

Did you know?

The newest statin drug, rosuvastatin, has been called a superstatin because it appears to reduce LDL cholesterol to a greater degree than the other approved statin drugs.

Did you know?

Street names for barbiturates include reds, red devils, yellow jackets, blue heavens, Christmas trees, and rainbows. They are commonly referred to as downers.

Inverse Relation Between IQ and Disease. Could this explain the Flynn effect? Inverse Relation Between IQ and Disease. Could this explain the Flynn effect?
Current Geopolitical Framework Current Geopolitical Framework
Buildings account for 15% of greenhouse gas emissions Buildings account for 15% of greenhouse gas emissions
E9-23 Prepare income statements Explain the difference in operating income E9-23 Prepare income statements Explain the difference in operating income
Explain the assumptions that must be satisfied in order to validly use the one-way ANOVA ... Explain the assumptions that must be satisfied in order to validly use the one-way ANOVA ...
Explain the myogenic autoregulation of the glomerular filtration rate Explain the myogenic autoregulation of the glomerular filtration rate
Video: Nucleic acid digestion -small intestine

For a complete list of videos, visit our video library