Suppose that an American buys a car from Germany with cash. For the United States, this counts as a:

Question

Quizplus · Accepted Answer

The purchase of a car from Germany with cash means that the American is importing a physical good from another country. This transaction would result in a debit to the current account, as the United States is paying for an import. However, since the American is using cash to purchase the car, there is no financial account (investment) involved in the transaction, meaning that there is no credit or debit to the financial account. Therefore, the correct answer is B: current account debit, financial account credit.

Suppose That an American Buys a Car from Germany with Cash