During some year a country had exports of $50 billion, imports of $35 billion, and purchased $30 billion of foreign assets. What was the value of domestic assets purchased by foreigners?
A)$35 billion
B)$20 billion
C)$15 billion
D)$5 billion

Question

Quizplus · Accepted Answer

The current account balance is the difference between exports and imports, which in this case is $50 billion - $35 billion = $15 billion. This means the capital account balance, which includes foreign asset purchases, must also be $15 billion in order for the overall balance of payments to be balanced. Since the country purchased $30 billion of foreign assets, it must mean that foreigners purchased $15 billion of domestic assets. Therefore, the value of domestic assets purchased by foreigners is $15 billion, which corresponds to choice C.

During Some Year a Country Had Exports of $50 Billion