Question

The two major types of transactions that affect the international flow of money are? A. supply and demand.

Answer 1

The two major types of transactions that affect the international flow of money are trade in goods and services and capital flows.

Answer: Option D

Explanation:

Out of all data on international economic transaction in the US, capital flow indicators are most prone to misleads and gaps. It is the exchange in financial assets between US and foreign residents.

Over the past ten years, capital flows have even exceeded trade flows. Information on this is largely needed to study the degree of US economy's internationalisation as below,

• Changing financial markets process in America
• Impact of foreign direct investments on the internal economy
• Foreign investment income in the US and net foreign debt service tax in the US
• The relationship between foreign capital flows and US interest and exchange rate.

Since net capital flows must be consistent with the balance of transactions and transfers (check account) for international goods and services, better information on cash flows would help explain the accuracy of US check account data.