Question

Determin the balance on the capital and financial account below. Explain whether the account has deficit...

Determin the balance on the capital and financial account below. Explain whether the account has deficit or surplus.
Direct investment abroad: $200
Foreign direct investment in Canada: $275
Portfolio investment abroad: $250
Portofolio investment in Canada: $200
Capital account balance: -$15
Expain whether this account balances with the current account.
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Answer #1

The Capital Account

A country's capital account, on the other hand, isn't broken down into sub-accounts. Instead, it refers to any and all international capital transfers. The overall expenditures and income are measured by the inflow and outflow of funds in the form of investments and loans flowing in and out of the economy. A deficit shows that more money is flowing out of a country, and a surplus shows that more money is flowing into a country.

DI abroad+Portfolio investment abroad=$450


DI in Canada and Portfolio investment in Canada=$475

Surplus=$25

It does not balance as current account and financial account balance must be equal to 0
Equation to the balance of payment account is Current account balance + financial account balance must be equal to 0

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