Chapter 8R, Problem 3MCQ

To determine

To find:

Relationship between financial account and current account.

Answer to Problem 3MCQ

Option B is correct.

Explanation of Solution

Option B is correct.

A country’s current account is equal but opposite to country’s financial account.

A country's current account balance, whether positive or negative, will be equal but opposite to its capital account balance

Option A is incorrect

Option C is incorrect

Option D is incorrect

Option E is incorrect

Economics Concept Introduction

Financial account is a component of balance of payments that records transactions of assets and liabilities to nonresidents concerning financial assets.

Current account is also a component of balance of payments that records transactions of goods and services with home country and rest of the world.