Suppose Canada's current account has a surplus of $18 billion in 2010. It follows that Canada must have a capital account of , meaning that there is a capital flow of this amount Canada.

Question

Quizplus · Accepted Answer

The current account surplus of $18 billion means that Canada received more income from exports and investments than it spent on imports and payments to foreign investors. However, this does not mean that Canada necessarily had a positive net capital flow. A capital account deficit means that Canada is investing more abroad than it is receiving in foreign investment, which could be the case if Canadian investors are seeking higher returns overseas. Therefore, the capital account should have a deficit of $18 billion, meaning that there is a net outflow of capital from Canada. Choice C is the only one that matches this explanation.

Suppose Canada's Current Account Has a Surplus of $18 Billion