If a U.S.firm buys tulips from a Dutch firm and the Dutch firm uses the dollars it gets to buy U.S.stocks,the U.S.trade balance ________ and the U.S.financial account ________.

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When a U.S. firm buys tulips from a Dutch firm, it means that the U.S. is importing goods from the Netherlands, which decreases the U.S. trade balance. However, when the Dutch firm uses the dollars it gets from selling tulips to buy U.S. stocks, it means that the Netherlands is now investing in the U.S., which increases the U.S. financial account. Therefore, the U.S. trade balance falls while the U.S. financial account rises.

If a USFirm Buys Tulips from a Dutch Firm and the Dutch