Question

In: Economics

Which of the following will balance a country when it has a current account deficit? a....

Which of the following will balance a country when it has a current account deficit?

a. Gross financial outflows b. Gross financial inflows
c. Net financial inflows d. Net financial outflows

Solutions

Expert Solution

Net Financial inflows will balance a country's current account deficit as it increases the net investment in the home country

Net financial inflows- in simple terms ; A country is receiving more than it is investing in rest of the world

Net financial ouflow is the opposit of Net financial inflows ( investing more, receiving less).

Gross inflows are net sales of domestic financial instruments to foreign residents

Gross outflows are net purchases of foreign financial instruments by domestic residents

Rahul Sunny answered 2 years ago
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