If a Canadian firm buys stereos from a Japanese firm and the Japanese firm uses the dollars it gets to buy Canadian Treasury bonds,what items are recorded in the Canadian balance of payments accounts?
A)credit the trade account;credit the capital account
B)credit the trade account;debit the capital account
C)debit the trade account;debit the capital account
D)debit the trade account;credit the capital account

Question

Quizplus · Accepted Answer

The purchase of stereos by the Canadian firm is an import, which is recorded as a debit in the trade account. The Japanese firm's purchase of Canadian Treasury bonds is an inflow of capital, recorded as a credit in the capital account.

If a Canadian Firm Buys Stereos from a Japanese Firm