If the balance of the current account in Canada is -$90 billion, which of the following is most likely to be true?
A)The balance on the financial account is positive.
B)The trade balance is positive.
C)Net foreign investment is positive.
D)The balance on the capital account is negative.
E)The Canadian dollar will appreciate.

Question

Quizplus · Accepted Answer

A negative balance on the current account means that Canada is importing more goods and services than it is exporting, resulting in a trade deficit. However, this does not necessarily mean that the financial account, which measures inflows and outflows of financial assets, is negative. It is possible for there to be a net inflow of financial assets, such as foreign investment, which would result in a positive financial account balance. Therefore, choice A is the best answer. The other choices are not necessarily true based on the given information.

If the Balance of the Current Account in Canada Is