Current account deficit are offset by______________?
Correct answer: C. capital/financial account surpluses
- A. merchandise trade deficits
- B. merchandise trade surpluses
- C. capital/financial account surpluses
- D. capital/financial account deficits
Explanation
A current-account deficit means the country spends more abroad than it earns and must be financed by a net inflow of foreign capital. Therefore it is offset by a capital or financial-account surplus.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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