1. If a country has a current account deficit of $25 and an official reserve account deficit of $20 then its capital account has a:

surplus equal to $45

deficit equal to $45

surplus equal to $5

deficit equal to $5

2. Under a system of fixed exchange rates, if a countrys demand for foreign currency currently exceeds its supply then the countrys exchange rate will most likely

decrease

increase

stay the same

3. Under a fixed exchange rate system, a country with a persistent BOP surplus will eventually

lower its exchange rate

exhaust its foreign exchange reserves

accumulate large holdings of foreign exchange reserves

both (a) and (b)