Question

In 2009, U.S. liabilities were dollar-denominated corporate and official debt for the most part, while U.S. external assets were mostly equities, bank loans, government debt, and foreign direct investment, denominated in foreign currencies. When the dollar fell in the wake of the financial crisis, what net effect was there on U.S. external wealth?

Answer 1

Answer: External wealth rose

Explanation: Liabilities are legal financial debts or obligations that arise from running a country and this is settled over time through the transfer of economic benefits such as money, goods and/or services. External asset is the value of assets a country has overseas which may be in equities, government debt or foreign investment, domiciled in foreign currencies.

Since the value of liabilities was already in dollars, there weren't any significant changes to the value of liabilities, but assets denominated in foreign currencies increased in value as they appreciated against the dollar.