The question consists of two parts.

(a) One of you friends in the class tried to understand the relationship between current account and capital account in the Balance of Payments and said since Canada imports more than it exports, it runs current account deficits. Thus, there is a need for Canada to import capital from foreign countries to finance its current account deficits. Provide your comments.

(b) In contrast to the U.S., China has realized continuous current account surpluses. What could be the main causes for these surpluses? Is it desirable to have continuous current account surpluses?