The sum of the current account, capital and financial account, and official settlements account is
A) a positive number if the country has a trade surplus.
B) a negative number if the country has a trade deficit.
C) positive or negative depending on whether the domestic exchange rate is appreciating or depreciating.
D) always equal to zero.

Question

Quizplus · Accepted Answer

The sum of the current account, capital and financial account, and official settlements account must always equal zero due to the double-entry accounting system used in balance of payments accounting. This system ensures that every transaction is recorded twice, once as a credit and once as a debit, so the sum of all parts of the balance of payments must balance to zero.

The Sum of the Current Account, Capital and Financial Account