Question

You attend a alumni event in Santiago Chile and you meet the Governor of the central...

You attend a alumni event in Santiago Chile and you meet the Governor of the central bank. The governor tells you that the country experiences “deficits in the capital account of the Balance of Payments.” Based on this statement, what do you infer about the Peruvian economy?

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Answer #1

A capital account shows the net change in physical or financial asset ownership for a nation and, together with the current account, constitutes a nation's balance of payments. The capital account includes foreign direct investment (FDI), portfolio and other investments, plus changes in the reserve account.

If a country has deficit in capital account,it means that it is investing more abroad and the rest of the world is investing less in Peru.If the capital account is in deficit,thw current account must be in surplus to equalize balance of payments.However,if the current account is also in deficit then the balance of payments would be in deficit.

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