hsc 2003 question 23 prt c (1 Viewer)

[redshift]

I need a answer for this question


Explain the realtionship between net income in the current account and the capital and financial account.


Thats it

 

[matt88m]

Money that comes in on the capital and financial account must be payed back in terms of equity or debt on the income component of the Current Account.

In basic terms, I think thats right?

 

[redshift]

Thanx matt you helped alot

 

[redshift]

==========Q24============

Explain how a SUSTAINED INCREASE IN THE CURRENT ACCOUNT DEFICIT COULD AFFECT AN ECONOMY


Need some help on this, cheers

 

[matt88m]

==========Q24============

Explain how a SUSTAINED INCREASE IN THE CURRENT ACCOUNT DEFICIT COULD AFFECT AN ECONOMY


Need some help on this, cheers

Well there is debate as to the extent an economy can be affected I guess.

On the one side, a sustained increase in the CAD could tell investors/whoever that the economy might not be able to sustain this CAD, this is what triggered the Asian Financial Crisis I believe, people pulling out their capital quickly because of high CAD levels or somewhere along those lines.

Though on the other hand, as most of the CAD is contributed by the private sector, it might be seen as normal market operations, and the private sector has put money overseas in hope of returning a higher return or somthing

Didnt explain that very well and not sure if my info is entirely correct Did this awhile ago.

 

[linxicm]

you can find out the answer straightaway in ur textbook titled 'The impact of CAD in economy'


good luck