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Comment on the following statement: “Since the United States imports more than it exports, it is...

Comment on the following statement: “Since the United States imports more than it exports, it is necessary for the United States to export capital from foreign countries to finance its current account deficits.” Do you agree with this statement? Why?

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Answer #1

No. The higher imports over exports causes current account deficit. It has to be seen whether current causes capital account surplus. Foreigners invest in US making Dollar stronger with respect with foreign currencies this would have made US current account deficit higher. Hence Capital account surplus would have caused higher imports over exports.

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