If the capital account is in surplus and the current account is zero, then the:
A)financial account must be in deficit.
B)balance of trade must be in deficit.
C)balance of payments must be in surplus.
D)balance of services must be in deficit.

Question

Quizplus · Accepted Answer

The balance of payments (BOP) consists of the current account, capital account, and financial account. If the current account is zero, there are no net exports or imports, and if the capital account is in surplus, there is a net inflow of capital. Therefore, to maintain a balance of payments, the financial account must be in deficit to offset the surplus in the capital account. Hence, choice A is correct. The balance of trade and balance of services are subcomponents of the current account, so they have no effect on the answer. The fact that the current account is zero means that the balance of trade and balance of services must offset each other.

If the Capital Account Is in Surplus and the Current