CA + KAFA equation doesn't balance? (1 Viewer)

[swagmeister]

Hey,

worked this out before but it's stumbling me again.

Supply of $A = Demand for $A
∴ M + Y debits + K outflow = X + Y credits + K inflow
rearranging gives:
∴ M - X + Y debits - Y credits = K inflow - K outflow
∴ CAD = KAFA surplus

BUT while above is what the textbook says, rearranging actually gives

∴ M - X + Y debits - Y credits = K outflow - K inflow

Why is this?

 

[Ekman]

Hey,

worked this out before but it's stumbling me again.

Supply of $A = Demand for $A
∴ M + Y debits + K outflow = X + Y credits + K inflow
rearranging gives:
∴ M - X + Y debits - Y credits = K inflow - K outflow
∴ CAD = KAFA surplus

BUT while above is what the textbook says, rearranging actually gives

∴ M - X + Y debits - Y credits = K outflow - K inflow

Why is this?

Well when you have the equation:
M + Y Debits + K outflow = X + Y credits + K inflow

You move the X and Y credits to the LHS so you get:
M-X + Y Debits - Y Credits + K outflow = K inflow

Then you move K outflow to the RHS to get:
M-X + Y Debits - Y Credits = K inflow - K outflow

Which is what the textbook gets

 

[swagmeister]

Well when you have the equation:
M + Y Debits + K outflow = X + Y credits + K inflow

You move the X and Y credits to the LHS so you get:
M-X + Y Debits - Y Credits + K outflow = K inflow

Then you move K outflow to the RHS to get:
M-X + Y Debits - Y Credits = K inflow - K outflow

Which is what the textbook gets

Bingo - forgot that CAD = KAFA, not CA = KAFA
hate it when I make mistakes like this

 

[Ekman]

Bingo - forgot that CAD = KAFA, not CA = KAFA
hate it when I make mistakes like this

Well don't worry too much about it, because I highly doubt they would want us to derive that CAD + KAFAS = 0.

 

[RecklessRick]

Well don't worry too much about it, because I highly doubt they would want us to derive that CAD + KAFAS = 0.

They can ask why KAFA + CAD = 0 though, which I think they did a few years back iirc

 

[swagmeister]

They can ask why KAFA + CAD = 0 though, which I think they did a few years back iirc

Yeah saw that question, the markers comments said you could approach it either like an equation or through explaining the link between the Financial Account (as part of KAFA) and NPY through returns on investment.