Final answer:
A decrease in the U.S. current account balance can be largely attributed to persistent trade deficits and borrowing from abroad, with the United States importing more than it exports and relying on foreign investment to finance these deficits.
Step-by-step explanation:
The explanations for a decrease in the current account balance over time in the United States include persistent trade deficits and borrowing from abroad. These trade deficits occur when a country imports more goods and services than it exports, which for the U.S. has meant soaking up savings from around the world. This can result in the country relying on foreign investment to supply the needed capital, thereby increasing its current account deficit.
Persistent Trade Deficits
Persistent trade deficits happen when there is a continuous excess of imports over exports. This can cause a decrease in the current account balance, as the U.S. spends more on foreign products than it earns from selling domestically produced goods abroad.
Borrowing from Abroad
Borrowing from foreign entities to finance the trade deficit is another contributor to the fall in the current account balance. This borrowing can take various forms, such as foreign governments or investors purchasing U.S. treasury bonds or investing in U.S. assets.