Economic theory shows that the current account deficit is always equal to the capital account surplus.This means that
A)the federal budget must always be in balance.
B)when a country exports more goods and services than it imports, it also imports assets equal to the difference.
C)current account deficits should be avoided.
D)trade deficits tend to be eliminated automatically.

Question

Quizplus · Accepted Answer

Economic theory dictates that the current account deficit (exports minus imports of goods and services) is always equal to the capital account surplus (the difference between a country's investments abroad and foreign investments within its borders). This means that when a country exports more goods and services than it imports, it also imports assets equal to the difference. Therefore, choice B is the correct answer.

Economic Theory Shows That the Current Account Deficit Is Always