Question:
The current account balance in an open economy:
The current account balance in an open economy:
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Understand the components of current account.
Updated On: Dec 21, 2024
- Always includes the balance on investment income
- Never includes the balance on investment income
- Includes the balance on investment income and flows of investment
- Includes flows of investment but not the balance on investment income
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The Correct Option is A
Solution and Explanation
The current account balance in an open economy includes income from foreign investments. This includes the income earned by residents of the economy from abroad, such as dividends, interest, and profits. It reflects the net flows of income from foreign assets owned by residents. Hence, the correct answer is (a).
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