How do you measure the current account balance?
A) net exports - inflow of interest payments
B) net exports - net inflow of dividends and interest payments
C) net exports + net inflow of dividends and interest payments
D) net inflow of dividends and interest payments - net exports

Question

Quizplus · Accepted Answer

The current account balance represents the difference between a country's total exports of goods and services and its total imports of goods and services. It also includes net inflows of dividends and interest payments from abroad.

Therefore, to measure the current account balance, we need to add net exports (exports minus imports) to the net inflow of dividends and interest payments from abroad.

Option A is incorrect because it does not include the net inflow of dividends and interest payments.

Option B is incorrect because it subtracts the net inflow of dividends and interest payments from the net exports.

Option D is incorrect because it subtracts net exports from the net inflow of dividends and interest payments.

Hence, the correct answer is C (net exports + net inflow of dividends and interest payments).

How Do You Measure the Current Account Balance