How does CAD relate to Balance of Payment? (1 Viewer)

[sk8ie_boi]

So how do current account deficit relate to balance of payment? .. and also external stability.

Can I say that cause of the high CAD, australia is finding it hard to acheive external stability? .. and also keeping it hard to maintain a balance of pyment?

 

[Gustus]

Current Account is one section of the Balance of Payments, along with the capital and finacial account, the Current Accout is most often a deficit, while the K and Fin. Ac. is positive due to

CA + (K & Fin. Ac.) = 0

Because the CA is a deficit, it is as though Australia, as an economy, has borrowed money from overseas economies, as with any borrowing, the external stability of the economy is effected due to the amount of money borrowed and its ability to repay this 'loan', this is why the CAD is measured as a percentage of GDP.

Check out the CSU site
http://www.hsc.csu.edu.au/economics/place/bop/Tutorial3AustraliasBalanc.html

And Wikipedia's site
http://en.wikipedia.org/wiki/Balance_of_payments
- do note that this is a site for the entire world so its terms are not Australian specific.

 

[sk8ie_boi]

Current Account is one section of the Balance of Payments, along with the capital and finacial account, the Current Accout is most often a deficit, while the K and Fin. Ac. is positive due to

CA + (K & Fin. Ac.) = 0

Because the CA is a deficit, it is as though Australia, as an economy, has borrowed money from overseas economies, as with any borrowing, the external stability of the economy is effected due to the amount of money borrowed and its ability to repay this 'loan', this is why the CAD is measured as a percentage of GDP.

Check out the CSU site
http://www.hsc.csu.edu.au/economics/place/bop/Tutorial3AustraliasBalanc.html

And Wikipedia's site
http://en.wikipedia.org/wiki/Balance_of_payments
- do note that this is a site for the entire world so its terms are not Australian specific.

so pretty much in an external balance essay i just say dat 'current account' + 'capital and finance account' = 'balance of payments' ... therefore a high current account deficit means a a surplus capital and finance account ...

and as more money is borrowed .. it raises the issue of not be able to pay it bak... okies .. i get it .. fanx