Suppose the Current Account of a Country Is in Balance

question 44

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 is running a budget deficit.
• C) the capital and financial account is now in deficit.
• D) the government must make official reserve transactions.

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