Which of the following statements is most accurate? A) Running a deficit in the current account balance simply means a country imports more than it exports, but a country can do this only for a short time. B) Capital inflows from foreigners are not bad even if the foreigners buy up domestic real estate, domestic industries and own other productive assets. C) A nation’s current account surplus or deficit is a good measure of the health of its economy. Your answer: B was correct! How can I correct the statement in choice B? I knew A and C were wrong and got B by process of elimination but i cannot figure out why B is F, or even the logic behind that sentence.
F as in False
B is not F, it is T. FII inflows in any sector barring few are beneficial in general for several reasons I) They bring dollars which can be used for funding current account deficit II) Foreign ownership bring world class management which improves efficiency and also brings best practices which forces domestic firms to improve III) Firms with foreign ownership are typically taxed more than domestic, which again gives the government more ficsal power I am just guessing.
Is A false in the above because they are equating Current Account to ONLY Imports and Exports - while other things Services, Transfers (unilateral gifts) etc. are not included?
cpk, i’d say the first part is correct (including your remarks, unilateral transfers…) except for the word “SHORT”. a country can run a current account deficit long term… barthezz