Question
Suppose that a country with a pure flexible exchange rate has a current account deficit and a capital account surplus equal in magnitude but opposite
Suppose that a country with a pure flexible exchange rate has a current account deficit and a capital account surplus equal in magnitude but opposite in sign. Which of the following may be true?
Multiple select question.
High interest rates may have caused the current account deficit.
Appealing investment opportunities in the country may have caused the country to run the current account deficit.
The central bank must intervene for the balance of payments identity to hold.
Domestic industries' lack of international competitiveness is causing the country to run the current account deficit.
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