If a country has a flexible exchange rate system and a deficit on current account
A) the balance of payments must be negative.
B) The balance of payments must be positive.
C) The balance on capital account must be negative.
D) The balance on capital account must be positive.

Question

Quizplus · Accepted Answer

In a flexible exchange rate system, a deficit on the current account often leads to an inflow on the capital account (such as foreign investments) to balance the payments, making the balance on the capital account positive.

If a Country Has a Flexible Exchange Rate System and a Deficit