Short form of Capital Account Financial Account

@@Kushagra_kanwal Thank you but what does 'K' stands for? if Capital account then it should be 'C'? correct me if iam wrong

@@surajtp1951 Yes it should be so, but conventionally CA means Current Account. So, to avoid confusion we use KAFA. 'K' is used in place of 'C' because of similar pronunciation.

If firms invest more, this potentially create more gobs and then peaple who had been employed earn a salary which the should spend....when individuals are getting salaries...this increase their purchasing power compared to when they were unemployed which increase aggregate demand in the economy....in addition this will cause firms to produce more outputs in order to meet all the demand which directly cause the GDP to increase. This is also mainly one of the main reason why government spend in an economy, that is, to expect economy growth throught an increase in GDP

A country can print only it's own currency. That's why they need to have Capital Account Surplus to offset Current Account Deficit because Global trade happens in US Dollars. Only USA can pay for it's trade deficit in it's own money i.e. US Dollars. But they don't do that because if they do so, it will increase money supply and cause inflation. When the entire world is investing in US and financing their current account deficit, there is no need to print more money.

I hope I was able to explain properly.

Khan Academy method is confusing though

Same In AP Macroecon and Im not even going to college, Im doing welding 💀

Easy. Money has.a cost. If I borrow $100 from you, you should expect something in return for the risk you are shouldering - I might not pay you back; and something for the inconvenience - you don't have the $100 to spend if you should need it. So I agree to pay you back after one year the $100 _plus_ $5 for your trouble. Summary: money has a cost. Now... The lower your interest rates, the less it's going to cost me. Summary: lower interest rates = cheaper money. I would probably buy a house if your interest rate is 1% but if you charge me 50% - no way. The house would end up costing me 50% more which is too expensive and I couldn't afford it any way. Summary: cheaper money leads to more purchasing. Now if there's 10 house's available but only one person buying then the buyer gets his choice. But if there are 1,000 people trying to buy then prices are going to go up - it's a sellers market! Summary: more purchasing leads to inflation. Review: Money has a cost (interest rate) -> lower interest rate is cheaper money -> cheaper money leads to more purchasing -> more purchasing leads to inflation Summary: Lower interest rates implies inflation