Re: Why must the Capital Acc. = the Current Acc.?

From: Zerge (zerge_at_hotmail.com)
Date: 02/23/05 

Date: 23 Feb 2005 08:08:57 -0800

Yurk Yurk wrote:
> I've looked into a number of economics texts and web sites. They give
> brief descriptions of the current account and the capital account and
then
> state that they must be equal. Why?
>
> For example, if Australia imports $A1 million of cars from Japan,
that is
> clearly a deficit on the current account. What is the equal
corresponding
> capital account transaction?
>
> Any help greatly appreciated.

They must be equal for the balance of trade to be zero, is what they
mean.
It doesn't mean it MUST be equal "or else".
So in other words they can be UNequal and usually are. Hence the
deficits and surpluses on the trade balance.

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