If the balance on current account and the balance on capital account do not sum to zero:
A) international transactions will cease.
B) the government will run a budget deficit.
C) official reserves will change to offset the difference.
D) current account transactions must be reduced.

Question

Quizplus · Accepted Answer

The balance of payments consists of the current account, the capital account, and the financial account, which includes official reserves. If the sum of the current and capital accounts does not equal zero, the discrepancy is offset by changes in official reserves. This adjustment ensures that the overall balance of payments remains balanced, as per the accounting principle that all transactions must net to zero.

If the Balance on Current Account and the Balance on Capital