A current account deficit could be offset by:
A) a fixed exchange rate.
B) FDI.
C) inflows of portfolio capital.
D) a and b
E) b and c

Question

Quizplus · Accepted Answer

A current account deficit means that a country is importing more than it is exporting, leading to a net outflow of foreign currency. FDI (foreign direct investment) can offset this deficit by bringing in foreign capital to finance the deficit. Inflows of portfolio capital, such as investments in the country's stock market or bonds, can also help to finance the deficit. However, a fixed exchange rate (Option A) may not necessarily offset a current account deficit as it may limit the country's ability to adjust its exchange rate in response to market forces.

A Current Account Deficit Could Be Offset By