If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be ________ in official reserves of ________.
A) a decrease; $20
B) an increase; $20
C) an increase; $180
D) a decrease; $180

Question

Quizplus · Accepted Answer

The balance of payments is made up of the current account, the capital and financial account, and the official reserves account. A negative current account balance of $100 and a positive capital and financial account balance of $80 means there is a net deficit of $20 ($100 - $80 = $20). To balance this, official reserves would decrease by $20.

If the Current Account Has a Negative Balance of $100