Consider the following statements 1 A deficit in the capital account means money is f...........

Economic Affairs Balance of Payments

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Consider the following statements:

1. A deficit in the capital account means money is flowing in the country

2. It also suggests the nation’s claims on foreign assets are decreasing

Which of the statements mentioned above is/are correct?

1 and 2

2 only

Neither of above

1 only

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Explanation:

1st statement is incorrect.
A deficit in the capital account means money is flowing out of the country, and it suggests the nation is increasing its ownership of foreign assets. The term "capital account" is used with a narrower meaning by the International Monetary Fund (IMF) and affiliated sources.