Concerning the U.S.balance of payments statement,throughout the past 30 years
A) the current account balance and the capital account balance have moved in the opposite direction
B) the current account balance and the capital account balance have moved in the same direction
C) the official reserve assets of the U.S.government have shrunk to zero
D) the official reserve assets of the U.S.government have increased in infinite amounts

Question

Quizplus · Accepted Answer

In the past 30 years, the current account balance and the capital account balance have generally moved in opposite directions. The current account measures trade in goods and services, while the capital account measures financial flows. This means that when the U.S. runs a trade deficit (importing more than it exports), it typically attracts financial inflows from other countries to finance the deficit, which leads to a surplus in the capital account. Conversely, when the U.S. runs a trade surplus, it typically invests some of the surplus abroad, leading to a deficit in the capital account. However, there have been periods when the two accounts moved in the same direction, such as during the dot-com boom in the late 1990s, when strong capital inflows led to a widening current account deficit. The official reserve assets of the U.S. government have not shrunk to zero, nor have they increased in infinite amounts.