Consider Canada's balance of payments.If the Canadian government were to purchase more foreign-exchange reserves,this transaction

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Quizplus · Accepted Answer

When the Canadian government purchases foreign exchange reserves, it is essentially buying an asset from abroad. This transaction would enter as a debit item in the official financing account, as it represents an outflow of funds from Canada to a foreign country. Therefore, option B is the correct choice. Options A and D are incorrect because they suggest that the transaction represents the sale of an asset, which is not the case. Option C is incorrect because the transaction does not relate to the current account, which records the flow of goods and services. Option E is incorrect because the capital-service account is not a recognized component of the balance of payments.

Consider Canada's Balance of Payments