Read the two statements and choose the correct option.
I. An overall BoP surplus adds to a country's foreign exchange reserves.
II. A current account deficit always means a fall in reserves.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Net receipts beyond payments are held as reserves. I is true.
A large capital inflow can more than cover a current account deficit, so reserves can rise. II is false.

Ten questions from Balance of Payments, at your own pace.

Ten questions from Balance of Payments, at your own pace.

Read the two statements and choose the correct option.I. An overall BoP surplus adds to a country's foreign exchange reserves.II. A current account deficit always means a fall in reserves.