If the United States has a current account deficit and the capital account is zero,which of the following must be true?
A)The balance on the financial account must equal the balance on the current account.
B)Net foreign investment must be negative as well.
C)Domestic private saving must be less than net foreign investment.
D)Domestic public saving must be less than net foreign investment.

Question

Quizplus · Accepted Answer

If the United States has a current account deficit and the capital account is zero, then the balance on the financial account must be equal in magnitude to the current account deficit. For the capital account to be zero, net foreign investment must also be zero. Therefore, net foreign investment cannot be negative as in option B. Options A, C, and D do not necessarily have to be true in this scenario.

If the United States Has a Current Account Deficit and the Capital