Figure 13.1. U.S. Capital and Financial Account

-Refer to Figure 13.1.Downward movements along U.S.capital and financial account schedule CA? would be caused by:
A) U.S. interest rates rising relative to foreign interest rates
B) U.S. interest rates falling relative to foreign interest rates
C) Taxes placed on income earned by U.S. residents from their foreign investments
D) Taxes placed on income earned by foreign residents from their U.S. investments

Question

Figure 13.1. U.S. Capital and Financial Account
 
-Refer to Figure 13.1.Downward movements along U.S.capital and financial account schedule CA? would be caused by:
A) U.S. interest rates rising relative to foreign interest rates 
B) U.S. interest rates falling relative to foreign interest rates 
C) Taxes placed on income earned by U.S. residents from their foreign investments 
D) Taxes placed on income earned by foreign residents from their U.S. investments

Quizplus · Accepted Answer

Downward movements along the U.S. capital and financial account schedule CA? are caused by a decrease in demand for U.S. assets relative to foreign assets. This could happen if U.S. interest rates fall relative to foreign interest rates which would make U.S. assets relatively less attractive to foreign investors. Option A is the opposite scenario where U.S. interest rates rise relative to foreign interest rates, would cause an upward movement along the U.S. capital and financial account schedule CA?. Options C and D are not relevant to the movement along the schedule as they relate to taxes and income earned by residents from their foreign and U.S. investments.