Question

Discussion Post - There There are questions related to The Balance of Payments - Respond to all questions by one paragraph for each.

1. How do we measure the international investment position of the United States at any point in time? How did the U.S. become a net debtor nation so rapidly?

2. What does a current account deficit mean?

Answer 1

Soln 1.

The international investment position of the United States a any point in time can be determined by its international indebtedness. It means the difference between the value of US assets in other countries and value of foreign assets in United Sates.Due to advanced technology and industrialization in US, investors from outside United States invested more in comparison to United States' residents have invested outside the country. This leads to U.S. becoming a net debtor nation rapidly.

Soln 2. Current account deficit - In simple words, current account deficit is calculated as excess of net imports over net exports of a country. The foreign investment value is more than the goods and services produced and exported to other country by the home country. In other words, home country requires foreign funds for ongoing economic balance.