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"The sum of the current account, the financial account, and the capital account is _____.

Multiple Choice
a) the trade deficit
b) zero
c) the reserve balance
d) 100"

User MoDFoX
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1 Answer

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Final answer:

The sum of the current account, financial account, and capital account is b) zero, since these accounts must balance out in the balance of payments.

Step-by-step explanation:

The sum of the current account, the financial account, and the capital account is b) zero. This is because these three accounts make up a nation's balance of payments, which must theoretically balance out. When there is a deficit in the current account, it is typically offset by a surplus in the capital and financial accounts, which represent financial capital incoming from foreign investors and other sources. The current account balance includes the trade balance, which is the gap between a nation’s exports and imports, in addition to international flows of income and unilateral transfers. When the United States has a trade deficit, it means that imports exceed exports, creating a negative trade balance which is then complemented by foreign capital flowing into the financial and capital accounts.

User Disp Hay
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