If a Country Has a Flexible Exchange Rate System and a Deficit

question 27

Multiple Choice

If a country has a flexible exchange rate system and a deficit on current account

• A) the balance of payments must be negative.
• B) The balance of payments must be positive.
• C) The balance on capital account must be negative.
• D) The balance on capital account must be positive.

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Definitions:

Accounting Periods

Periods of time covered by financial statements, usually consisting of 12 months.

Prepaid Expenses

Payments made in advance for goods or services, which are recognized as assets on a balance sheet and expensed over time as the benefit is received.

Asset Account

An account that records the value of resources owned by an entity, which can provide future economic benefits.

Unearned Revenue

Money received by a company for goods or services yet to be provided; it is recorded as a liability until the service or product is delivered.