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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

Occasionally, a government official will argue that

a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.

What are the main components of the national savings and investment identity?

How does the bottom portion of Figure 10.3, showing the international flow of investments and capital, differ from the upper portion?

State whether each of the following events involves a financial flow to the U.S. economy or away from the U.S. economy:

a. Export sales to Germany

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d. Imported oil from the Russian Federation

e. Japanese investors buying U.S. real estate

Will nations that are more involved in foreign

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