The current account balance plus net capital inflows equals

Question

Quizplus · Accepted Answer

This is essentially a restatement of the national income accounting identity, which states that the current account balance plus net capital inflows must equal zero (not E). This is because the current account measures a country's net exports, while net capital inflows represent the difference between foreign investment in a country and a country's investment abroad. If a country is running a trade deficit (i.e. current account balance is negative), it must be financed by capital inflows from abroad. Therefore, the sum of the current account balance and net capital inflows must equal zero in order to maintain this identity.

The Current Account Balance Plus Net Capital Inflows Equals