(a) List three reasons why funds would flow from the US to another country (or vice versa). With each of your reasons, explain why the money would be changing locations.

(b) When money leaves the US, how does this impact the value of the US currency? Draw how this would impact the dollar in the foreign currency market (use the Euro as the comparison currency).

(c) Lastly, explain the difference between the capital and current accounts and give one example of something that would fall in the current account and one thing that would fall in the capital account.

Answer rating: 100% (QA)

a Trade Imbalances When a country imports more goods and services than it exports it experiences a trade deficit In such cases funds flow from the US ... View the full answer