Suppose Cavland's exports equal $400 billion and its imports equal $500 billion.
Foreigners purchased $200 billion worth of assets in Cavland. What is Cavland's
Balance on its capital account?

Question

Quizplus · Accepted Answer

The balance on the capital account is calculated by subtracting the trade deficit from the foreign purchase of assets. Cavland has a trade deficit of $100 billion ($500 billion imports - $400 billion exports), and foreigners purchased $200 billion worth of assets, resulting in a capital account balance of $100 billion ($200 billion - $100 billion).

Suppose Cavland's Exports Equal $400 Billion and Its Imports Equal