(Table: Balance of Payments) Which statement(s) is/are TRUE? I. The current account balance is equal to -$700 billion. II. The capital account balance is equal to $700 billion.
III) The statistical discrepancy must equal $100 billion.
A) I only
B) II only
C) I and II only
D) II and III only

Question

(Table: Balance of Payments) Which statement(s) is/are TRUE?  I. The current account balance is equal to -$700 billion. II. The capital account balance is equal to $700 billion.
III) The statistical discrepancy must equal $100 billion.
A) I only 
B) II only 
C) I and II only 
D) II and III only

Quizplus · Accepted Answer

The current account balance represents the difference between a country's exports and imports, as well as net investment income and transfer payments. In this case, the current account balance is -$700 billion, indicating that the country has a trade deficit and is paying out more money to foreign entities than it is receiving.
The capital account balance, on the other hand, represents the flow of capital into and out of the country. A positive capital account balance means that there is more capital flowing into the country than out of it. In this case, the capital account balance is $700 billion, indicating that there is a net inflow of capital into the country.
The statistical discrepancy is the difference between a country's overall balance of payments and the sum of its current and capital account balances. There is no information given in the table about the size of the statistical discrepancy, so it is impossible to say whether or not it must equal $100 billion. Therefore, statement III cannot be considered true or false based on the information in the table.

(Table: Balance of Payments) Which Statement(s) Is/are TRUE? I