SAVINGS, THE BALANCE OF PAYMENTS, AND THE MONEY SUPPLY
37
We now take into consideration the capital account. If an economic agent
wishes to export capital, say, to buy shares on the New York Stock Exchange,
he supplies rupees to be converted to dollars. From the viewpoint of the impact
on currency demand, this is like an import of goods and services in that there
is a demand for dollars. We thus add the capital export
X
K
to the
D
M
sched-
ule and denote the total demand for dollars as
D
M
+
X
K
. Conversely, we may
have agents overseas who want to buy stock on the National Stock Exchange
in India—they supply dollars in ...
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