When a country's current account balance is added to its capital account balance, the sum should be:

Question

Quizplus · Accepted Answer

By definition, the current account measures a country's net exports (exports minus imports) plus its net income from abroad (income earned by domestic residents from abroad minus income earned by foreign residents in the domestic economy). The capital account measures the net flow of investment between a country and the rest of the world. When these two accounts are added together, the resulting balance should be zero, as every transaction involving a payment from one country to another should be matched by an opposite payment in the other direction. Therefore, the correct answer is B, which states that the sum of the current account balance and the capital account balance should be zero.

When a Country's Current Account Balance Is Added to Its