Because demand for one currency is also the supply of another currency, the balance of payments accounts must add up to zero.

Question

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This statement is true. The balance of payments includes all international transactions between a country and the rest of the world, including exports and imports of goods and services, financial transactions, and transfers of assets. Since every transaction involves the exchange of one currency for another, the demand for one currency is also the supply of another currency. Therefore, the total amount of payments from one country to another must balance out, and the balance of payments accounts must add up to zero.

Because Demand for One Currency Is Also the Supply of Another