If canada buys more goods from chile than it exports to them...

If Canada buys more goods from Chile than it exports to them, this Group of answer choices would create a current account surplus would promote a trade surplus for Canada would lead to a trade deficit for Canada with Chile would lead to a balance of payments imbalance for Canada

Transcript

00:01 So here we're talking about foreign trade and just let me very briefly define these things.

00:04 I'm going to call the capital and financial account, just the capital account.

00:08 That's a more traditional name, but it's the same thing, right? capital and financial account.

00:13 The whole idea is that the capital account refers to the movement of capital or assets, whereas the current account is looking at goods and services.

00:25 Roughly speaking, the capital account is trying to capture savings versus investment.

00:30 Our assets moving in and out of the country, right? our debts moving in another country, whereas the current account is trying to capture whether goods and services are moving out of the country, right? goods and services.

00:41 So here we have a shock, right? we are going to export more to japan.

00:51 So this influences the canadian current account, right? it increases the canadian and current account and would therefore decrease the japanese current account, right, if we were thinking about it from the perspective of japan.

01:10 We in some sense have more current earnings.

01:14 That's how i would think of it, right? when we sell more stuff to japan, we have more current earnings in japan.

01:25 That's the easier part, right? we are earning more on trade, so we have more credits in our current account, right? the current account is how much money is coming in from trade minus how much money is going out from trade, right? so this is going to increase our balance of payments from trade.

01:42 The whole idea here now is that the capital and financial account, if you want to use the full term, reflects the opposite because if goods are going one way, money must be going the other way, right? so here we are, the japanese are borrowing from canada.

02:05 So we are sending money.

02:09 We are lending money to japan, right? we are lending to japan.

02:19 That is, in some sense, we are buying japanese debt, right? this is what's going on, right? the japanese need money from us...

Question

If Canada buys more goods from Chile than it exports to them, this Group of answer choices would create a current account surplus would promote a trade surplus for Canada would lead to a trade deficit for Canada with Chile would lead to a balance of payments imbalance for Canada

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