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

From: Andy F. (never.mind_at_tesco.net)
Date: 02/24/05 

Date: 24 Feb 2005 05:57:03 -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.

Someone in Japan has now got a million Australian dollars. This counts
as a capital asset.If they don't use it to buy Australian goods, the
only other thing to do with it is to exchange it for other Australian
assets.

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