Can someone explain to me this answer about balance of payment?


I’m practicing Schweser exams for CAIA Level 2 and correcting the Exam n° 1 Section 1 there is a question under the Topic Asset Allocation that has the following answer:

“Substantial current account surplus will result in currency reserve deficits in the financial (capital) account”.

According to the book this statement is correct but i dont understand the logic behind it. Can someone explain it to me?


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Here is how I think of this, in the book, the underlying formula is change of Reserve account=Change of Current account + Change of Capital (Financial) account. In this question, change of current account is plus, and in order to keep reserve account constant, change of capital must be negative. Again, I go back to my previous “complaint” that the Schweser Q-Bank questions are poorly word, takes some assumptions. Hope I won’t see those poorly worded questions on the actual exa.