Under a floating exchange rate system with mobile international capital, it is always true that current account
A)deficit + capital account surplus = trade deficit.
B)surplus − capital account surplus = trade deficit.
C)surplus + capital account deficit = 0.
D)surplus − capital account surplus = 0.

Question

Quizplus · Accepted Answer

Under a floating exchange rate system with mobile international capital, the balance of payments is always in equilibrium. This means that a current account surplus plus a capital account deficit must equal zero, as any imbalance would be corrected by changes in the exchange rate.

Under a Floating Exchange Rate System with Mobile International Capital