Scenario: There are two countries-Country X and Country Y-that trade only with each other. During a particular year, the residents of Country X purchased buildings worth $10 billion in Country Y. None of the other transactions between the two countries during that year involved the purchase or sale of assets.
-Refer to the scenario above.The purchase of assets by the residents of Country X would lead to a ________ in Country X.

Question

Quizplus · Accepted Answer

The purchase of buildings in Country Y by residents of Country X represents a capital outflow from Country X, which would be recorded in the financial account of the balance of payments. Since Country X is purchasing assets in Country Y, it means money is flowing out of Country X to Country Y, leading to a financial account deficit for Country X.

Scenario: There Are Two Countries-Country X and Country Y-That Trade