If U.S. imports increase, the sum of the balance of payments accounts (the sum of the current account plus capital and financial account plus official settlements account)
A) becomes negative.
B) becomes positive.
C) becomes negative or positive depending on the government budget deficit or surplus.
D) does not change.

Question

Quizplus · Accepted Answer

The sum of the balance of payments accounts (current account, capital and financial account, and official settlements account) always balances out to zero because a deficit in one account is offset by a surplus in another, reflecting the double-entry accounting system used in balance of payments. An increase in imports would be recorded as a debit in the current account but would be offset by a corresponding credit in the financial or capital account, such as through foreign loans or investment in the U.S., keeping the overall balance unchanged.

If US Imports Increase, the Sum of the Balance of Payments