In a floating exchange rate system,the capital account balance equals the negative of the current account balance.
This is because countries that run trade surpluses are able to use the surplus to purchase assets in other countries.

Question

Quizplus · Accepted Answer

In a floating exchange rate system, the capital account balance and the current account balance are typically equal and opposite, as a surplus in the current account (trade surplus) is offset by a deficit in the capital account due to investment in foreign assets.

In a Floating Exchange Rate System,the Capital Account Balance Equals