Holding official reserves constant,a deficit in the current account means a surplus in the capital account.

Question

Quizplus · Accepted Answer

This is known as the balance of payments identity, which states that the current account balance plus the capital account balance (excluding official reserves) must equal zero. Therefore, if there is a deficit in the current account (importing more than exporting), there must be a surplus in the capital account (capital flowing into the country from foreign investors).

Holding Official Reserves Constant,a Deficit in the Current Account Means