Which of the following is true under a pure flexible exchange rate regime? A) Balance of current account - Balance of capital account 0 B) Balance of current account + Balance of capital account

Question

Which of the following is true under a pure flexible exchange rate regime?
A) Balance of current account - Balance of capital account > 0
B) Balance of current account + Balance of capital account < 0
C) Balance of current account + Balance of capital account = 0
D) Balance of current account - Balance of capital account = 0x

Quizplus · Accepted Answer

In a pure flexible exchange rate regime, the exchange rate is free to adjust to balance current and capital accounts. Therefore, the sum of the balance of current account and balance of capital account will always equal zero.

Which of the Following Is True Under a Pure Flexible