GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A capital account surplus might be expected to cause a current account deficit because the associated
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capital inflow would cause the nation’s currency to depreciate, contributing to a trade deficit
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capital outflow would cause the nation’s currency to depreciate, contributing to a trade deficit
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capital inflow would cause the nation’s currency to appreciate, contributing to a trade deficit
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capital outflow would cause the nation’s currency to appreciate, contributing to a trade deficit
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Explanation:
Detailed explanation-1: -International economics This means that a surplus on the capital account will lead to outflows of interest and dividends in the future. The inflow of funds may exert an upward pressure on the exchange rate as the demand for the domestic currency will increase.
Detailed explanation-2: -A current account deficit is likely to imply a trade deficit. That means more goods and services are flowing into the country than are flowing out. A capital account surplus means more spending is flowing into the country for the purchase of assets than is flowing out.
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