If the U.S.faces a balance-of-payments deficit on the current account,it must run a surplus on:
A) The official settlements account
B) The capital account
C) Either the official settlements account or the capital account
D) Both the official settlements account and the capital account

Question

Quizplus · Accepted Answer

If the U.S. is facing a balance-of-payments deficit on the current account, it means that it is importing more goods and services than it is exporting. This would lead to an outflow of dollars. To pay for these imports, the U.S. would need to either borrow from foreign sources (through the capital account), or sell assets to foreign entities (through the official settlements account). Therefore, the U.S. could run a surplus in either the official settlements account or the capital account to finance the current account deficit. Running a surplus in one account can offset the deficit in another account. However, it is not necessary to run a surplus on both accounts simultaneously.

If the USFaces a Balance-Of-Payments Deficit on the Current Account,it Must Run