Based on the following information, what is the balance on the financial account? Exports of goods and services = $5 billion
Imports of goods and services = $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in Canada = $4 billion
Increase in Canadian holdings of assets in foreign countries = -$1 billion
A)$3 billion
B)$2 billion
C)$1 billion
D)-$1 billion
E)-$3 billion

Question

Quizplus · Accepted Answer

The financial account is the difference between the net inflow of foreign assets and the net outflow of domestic assets. In this case, the net inflow of foreign assets is $4 billion (increase in foreign holdings of assets in Canada) and the net outflow of domestic assets is -$1 billion (increase in Canadian holdings of assets in foreign countries). Therefore, the balance on the financial account is $4 billion - -$1 billion = $5 billion.

Based on the Following Information, What Is the Balance on the Financial