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.capital and financial account ________.

Question

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The U.S. trade balance falls because the purchase of tulips is an import, increasing the trade deficit. The U.S. capital and financial account rises because the Dutch firm uses the dollars to invest in U.S. stocks, which is an inflow of capital.

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