Help the new member. (1 Viewer)

[Haku]

For the CA, current transfer into australia is considered a credit. Is this current transfer same as capital transfer in the CFC? So a credit in the CA is also a credit in CFC?

Also how does a floating Exchange Rate provide a cushion for the economy?

 

[underthebridge]

No there is a small difference in them. Current transfers are funds transferred where no specific g+s is provided in return. For example, funds paid for insurance claims and money taken out of Australia by developing countries in the form of foreign aid.

Capital transfers however include the transfer of funds that actually involve investment in capital, and includes funds brought in by migrants and debt forgiveness. Whist some foreign aid is included here, it refers to foreign aid that is used to build infrastructure, as opposed to a simple donation of money.

I hope that explains it, I'm not fully convinced myself but there is really only a small technical difference and i doubt it is very important. Just remember that current transfers, being on the current account are irreversible, and capital transfers are reversible.

 

[Haku]

thanks, what do u mean irreversible?

i still don't see much of a difference , you said that illegal immigrants bringing money in, shouldn't that be a credit in the CA? cause money gets injected with out G+S. And how u said some foreign aid is credit in CA and some being in CFC is so confusing.