Use the information below to answer the following questions.
Fact 25.4.1
You are given the following information about the country of Ecoland, whose currency is the turkey, and whose official settlements balance is zero.

-Refer to Fact 25.4.1.What is the net exports?
A)-2 billion turkies
B)-1 billion turkies
C)3 billion turkies
D)-3 billion turkies
E)1 billion turkies

Question

Use the information below to answer the following questions.
Fact 25.4.1
You are given the following information about the country of Ecoland, whose currency is the turkey, and whose official settlements balance is zero.
 
-Refer to Fact 25.4.1.What is the net exports?
A)-2 billion turkies 
B)-1 billion turkies 
C)3 billion turkies 
D)-3 billion turkies 
E)1 billion turkies

Quizplus · Accepted Answer

Since the official settlements balance is zero, the current account balance must be equal in magnitude and opposite in sign to the capital and financial account balance. Therefore, the net exports must be equal to the net inflow of capital and financial flows, which is negative given that the capital and financial account balance is positive. This means that Ecoland is importing more than it is exporting, resulting in a current account deficit of 3 billion turkies. Thus, the correct answer is D.

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