ECO 2121 Lecture 3: ECO 2121 lecture 3
19 Oct 2016
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Document Summary
In 2014, current account of -. 9 billion means that payments to foreigners for trade exceeded receipts from them by this amount. Canadian resident used more output than they produced. The ka entry in 2014 was net transfer of sh. 4 b. To cover, ca plus ka of -. 5 billion canada needed to borrow from foreigners (or sell assets to them). Canada needed net liabilities of this amount to foreigners. In 2014, canadian-owned assets abroad increased by -. 9 b and canadian added liabilities to foreigners equal to . 1 b. Hence, the balance of fa was . 2 b, the amount that canada increased its net liability to foreigners. As ca+ka+fa=0 in theory, but it does not happen all the time in practice due to several practical reasons. The difference is considered as statistical discrepancy (sd). Surpluses [deficits] on the ca of the bop accounts must be offset by deficits.
