Suppose the Current Account of a Country Is in Balance

question 382

Multiple Choice

Suppose the current account of a country is in balance and the official settlements account equals 0. A new transaction occurs so that the current account is now in surplus, but the official settlements account does not change. From this we know that

• A) the balance of trade is now in surplus.
• B) the government must make official reserve transactions.
• C) the capital and financial account is now in deficit.
• D) the government is running a budget deficit.

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Definitions:

Process Inventory

Inventory that consists of items that are in the production process but have not yet been completed.

Cost System

An accounting system designed to capture, measure, and allocate costs associated with the production of goods or provision of services.

Equivalent Units

A concept in cost accounting used to convert partially completed goods into the equivalent of a full finished unit for inventory valuation.

Conversion Costs

Expenses associated with converting raw materials into finished products, typically including labor and overhead costs.