China runs a current account surplus with the United States.Which of the following must be true about China's balance of payments with the United States?
A)It must run a financial account deficit.
B)Its balance of trade must be in deficit.
C)Its net exports must be negative.
D)Its balance of payments must run a deficit.
E)China is the sole beneficiary of trade between the two countries.

Question

Quizplus · Accepted Answer

A current account surplus means that China is exporting more goods and services to the US than it is importing. This leads to a surplus on the current account of China's balance of payments with the US. To balance the accounts, China must run a financial account deficit, meaning that it is investing more in the US than the US is investing in China. This is necessary for China to maintain its current account surplus. Therefore, choice A is the correct answer. B, C, and D are not necessarily true based on the information given. Choice E is not relevant to the balance of payments analysis.

China Runs a Current Account Surplus with the United States