The next questions refer to the following.
Consider a country that, during a given year, has
$20 billion in net exports of goods,
-$3 billion in net exports of services,
$3 billion in repatriated income,
-$7 billion in net overseas transfers,
-$25 billion in net direct investment,
$41 billion in net portfolio investment,
-$10 billion in other net investment, and no additional capital account transactions.
-This country is most likely
A) experiencing a balance of payments crisis
B) accumulating $19 billion in foreign reserves
C) reducing its holding of foreign reserves by $7 billion
D) missing $11 billion in errors and omissions
E) borrowing $4 billion from the IMF

Question

Quizplus · Accepted Answer

The country is experiencing a current account surplus of $13 billion ($20 billion in net exports of goods - $3 billion in net exports of services - $7 billion in net overseas transfers), and its capital account is in surplus by $0. This means that the overall balance of payments is a surplus of $13 billion. Therefore, the country is accumulating $13 billion in foreign reserves, not reducing or borrowing from the IMF. There is no evidence of a balance of payments crisis or missing errors and omissions.

The Next Questions Refer to the Following