ATAR Notes: Forum
VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Economics => Topic started by: pd_123 on November 11, 2019, 04:59:47 pm
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Can you please explain the relationship between th current account and the capital and financial account.
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Essentially, when we have a current account deficit, it means our spending has exceeded our income, obviously, this excess spending technically cannot occur, without being financed by loans, or even sale of equity in Australian businesses. These loans and sales of equity in Australian businesses count as credits in the capital and financial account. That’s why, whenever our spending exceeds income, it’s always met by an equal amount of credits in the capital and financial account, because it’s effectively being financed by those credits of loans from foreigners and equity payments (don’t know if equity payments is an actual term, but it sounds cool :P)