Capital Account 1 Flashcards
Economy’s foreign assets vs. economy’s foreign liabilities
Net international investment position AKA net foreign assets
Country’s capital and financial account measures flow of (2)
Financial claims (changes in asset positions)
One who owes amount of money
Debtor
Net claim
Liability owed
A country’s net claim on another country means
That country extended credit for other country to pay back
If country’s net claims on the rest of the world exceed their claims on it
It has positive net foreign assets
A country with positive net foreign asset is considered
A net creditor
A country with negative foreign assets is considered a
Net debtor
Change between net creditor to debtor occurs in
Capital and financial account
The financial account of a country measures
Increases/decreases in international ownership of assets
Country capital account measures
Financial transactions that do not affect income, production, savings
Financial transactions that country’s capital account measures (3)
International transfer of drilling rights, trademarks, copyrights (intangible)
Country’s current account represents
Country’s net income over a period of time
Country’s capital account records
Net changes of assets/liabilities during a particular year
Any surplus and deficit in the current account is
Matched and canceled out by an equal surplus or deficit in the capital account
Country’s current account deals with (2)
Country’s short term transactions, difference between its savings and investments
Country’s short term transactions referred to as
Actual transactions
Actual Transactions have real impact on (3)
Income,output,employment level
How do Actual Transactions have an impact on income, output, employment level
Through the movement of goods and services in an economy
Visible trade
Export/import of goods
Invisible trade
Export/import of services
The current account consists of (3)
Visible/invisible trade, unilateral transfers, investment income
Investment income examples (countries) (2)
Land, foreign shares
Unilateral transfers definition
One way transfer of money, goods, services from one party to another
Unilateral transfer examples (2)
Payments given by governments to their citizens, one country to another with foreign aid
Credit and debit of foreign exchange also recorded in
Balance of current account
The resulting balance of the current account is approximated as
Sun total of balance of trade
