If China has a current account surplus, it must have
A) a capital account surplus.
B) a capital account deficit.
C) a decrease in foreign aid.
D) capital inflows.

Question

Quizplus · Accepted Answer

A current account surplus means that China is exporting more goods and services than it is importing, which in turn creates a demand for its currency. This leads to an increase in its exchange rate, making China's exports more expensive and imports cheaper. To counteract this, China's central bank buys foreign assets, creating a capital account deficit.

If China Has a Current Account Surplus, It Must Have