In a freely floating exchange rate system, if the current account is running a deficit

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In a freely floating exchange rate system, the balance of payments must always be zero due to the accounting identity of the balance of payments, which states that the current account plus the capital account must equal zero. Therefore, if the current account is running a deficit, the capital account must be running a surplus in order to maintain a balance of payments equilibrium.

In a Freely Floating Exchange Rate System, If the Current