"If the official settlements balance is zero, a current account surplus implies an equal capital and financial account deficit." Is the previous statement correct or incorrect? Briefly explain your answer
What will be an ideal response?
The statement is correct. The sum of the current account balance plus the capital and financial account balance plus the official settlements account must equal zero. If the official settlements account balance is zero, then the sum of the current account balance plus the capital and financial account balance must equal zero. Therefore a current account surplus must be "balanced" by an equally-sized capital and financial account deficit.
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