A nation's annual balance of payments statement must always balance because
A) a nation's imports are limited to the value of its exports.
B) a nation's exports and imports are always paid with dollars.
C) all international transactions must be settled in one way or another.
D) a trade deﬁcit must be matched by an equal surplus of investment income.

Question

Quizplus · Accepted Answer

The balance of payments statement always balances because all international transactions must be settled in one way or another, whether it be through the exchange of goods and services or through financial transactions. In other words, every transaction that creates a credit (e.g. export of goods, receipt of foreign investment) must have a corresponding debit (e.g. import of goods, payment of foreign debt) to ensure that the overall balance is zero.

A Nation's Annual Balance of Payments Statement Must Always Balance