If a nation's balance on current account is a negative $20 billion, while its balance on capital account is a positive $16.5 billion, we can conclude with certainty that this nation is experiencing:
A)a merchandise trade deficit.
B)a merchandise trade surplus.
C)a reduction in its stock of foreign currency.
D)a balance of payments surplus.

Question

Quizplus · Accepted Answer

A negative current account balance indicates that the nation is spending more on foreign trade than it is earning, leading to a reduction in its stock of foreign currency.

If a Nation's Balance on Current Account Is a Negative