Which of the following statements about the balance of payments accounts is correct?

Question

Quizplus · Accepted Answer

The balance of payments accounts includes three accounts: the current account, the capital and financial account, and the official settlements account. However, the sum of all three accounts is not always zero. If a country runs a trade surplus (i.e. exports exceed imports), it will have a positive balance on the current account, which may be offset by deficits on the capital and financial account (i.e. investments abroad exceed foreign investments in the country) and the official settlements account (i.e. changes in reserves). In this case, the overall balance of payments will be positive. Similarly, if a country runs a trade deficit, it may have a negative balance on the current account, which may be offset by surpluses on the capital and financial account and/or the official settlements account, resulting in a negative overall balance of payments.

Which of the Following Statements About the Balance of Payments