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We observe a country is running a current account deficit. If the country has a fixed exchange rate: a.The central bank is losing reserves. b.The
We observe a country is running a current account deficit.
If the country has a fixed exchange rate:
a.The central bank is losing reserves.
b.The central bank could be gaining or losing reserves depending on capital inflows.
c.The current account deficit is equal to the capital and financial account surpluses.
d.The country is gaining real resources on net from other countries.
If it has a floating exchange rate, is that correct to select c?
Please help me figure out what am I supposed to do with those two questions. Thank you in advance.
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