An increase in perceived risk of foreign assets increased both the financial account surplus and current account deficit in the United States during the late 1990s.

Question

Quizplus · Accepted Answer

An increase in perceived risk of foreign assets can lead to capital inflows into the U.S., increasing the financial account surplus. Simultaneously, it can lead to a stronger dollar, making U.S. exports more expensive and imports cheaper, thus increasing the current account deficit.

An Increase in Perceived Risk of Foreign Assets Increased Both