Question : A ____ deficit is financed by net capital flows the rest of the world, thus by a capital account surplus.
Option 1: current account
Option 2: saving account
Option 3: capital account
Option 4: asset account
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Correct Answer: current account
Solution : The correct option is current account.
In economics, a nation's balance of payments includes two parts: the capital account and the current account. When a nation's purchases of goods and services surpass its exports, it has a current account deficit, which is an indicator of trade. Selling assets or borrowing money from another country are the only ways a government with a current account deficit may pay for its shortfall.
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