Except for a statistical error under flexible exchange rates,any current account deficit

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In a flexible exchange rate system, any current account deficit must be completely offset by a capital account surplus. This is because, in this system, exchange rates adjust to balance the current account, and any deficit will lead to a depreciation of the currency, making exports more competitive and imports more expensive, ultimately reducing the deficit. However, a capital account surplus, in the form of inflows of foreign investment or borrowing, can offset the current account deficit and keep the exchange rate stable.

Except for a Statistical Error Under Flexible Exchange Rates,any Current