A Deficit on the Current Account

question 219

Multiple Choice

A deficit on the current account

• A)normally causes a surplus on the capital and financial account.
• B)normally causes a deficit on the capital and financial account.
• C)has no relationship to the capital and financial account.
• D)means that a nation is making international transfers.

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Definitions:

Unsystematic Risk

The risk of price change in a company's stock due to company-specific events, distinguishable from market-wide risk.

Business-specific Risks

Refers to the uncertainties or potential financial losses that are directly related to the operations and environment of a particular company or industry.

Diversified Away

The reduction of risk in an investment portfolio by allocating investments among various financial instruments, industries, and other categories to minimize the impact of any single asset or risk.

Perfectly Negatively Correlated

This refers to a relationship between two variables where one variable increases as the other decreases with a correlation coefficient of -1.