Question: Why must FA+CA = 0, or FA = -CA? Assuming you export your farm produce to Japan, you get paid some Yen. You can

Why must FA+CA = 0, or FA = -CA? Assuming you export

Why must FA+CA = 0, or FA = -CA? Assuming you export your farm produce to Japan, you get paid some Yen. You can a. buy something from Japan, making CA = X-M=0=-FA b. deposit Yen in a JP bank, flowing capital out, have FA = -CA (similar result if you buy JP stocks or bonds) c. you sell Yen to a US bank in exchange for home currency, then the Yen must go for a. or b. again, making FA = -CA

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