If a nation's current account balance is -$20 billion,while its capital and financial account balance is +$17.5 billion,we can conclude with certainty that this nation is experiencing a:
A)merchandise trade deficit
B)merchandise trade surplus
C)reduction in its stock of foreign currency reserves
D)balance-of-payments surplus
E)deficit on its non-merchandise transactions

Question

Quizplus · Accepted Answer

A negative current account balance indicates that a country is importing more goods, services, and capital than it is exporting. If the capital and financial account balance is positive but less than the deficit in the current account, it suggests the country is financing this deficit by reducing its foreign currency reserves or by incurring liabilities, as the sum of the current account and the capital and financial account does not balance to zero.

If a Nation's Current Account Balance Is -$20 Billion,while Its