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I understand that when it comes to external stability in the VCE Economics course there are TWO accounts reflecting Australia's international transactions

  • the Current Account

and

  • the Capital and Financial Account

I fail to understand why the latter is ALWAYS opposite of the first account

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1 Answer

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it refers to the double entry accounting principle. The credits must always equal the debits, thus the surplus of debits on the current account and balanced by the credits of the capital and financial account

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So in theory, the answer is "it just is"? I had a feeling my teacher MEANT that, but did not want to admit it! – asa.hoshi Oct 28 at 7:07
Yep, I think it's basically "by definition". The definitions of the Current Account and the Capital/Financial Account are done so in a way so that they must close to net zero (Balance of Payments) – Collin Li♦ Nov 1 at 2:05

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