45. A capital account surplus might be expected to cause a current account deficit because the associated
A. capital inflow would cause the nation’s currency to appreciate, contributing to a trade deficit
B. capital inflow would cause the nation’s currency to depreciate, contributing to a trade deficit
C. capital outflow would cause the nation’s currency to depreciate, contributing to a trade deficit
D. capital outflow would cause the nation’s currency to appreciate, contributing to a trade deficit
A. Capital inflow would cause the nation's currency to appreciate,contributing to a trade deficit.
Note: Capital account surplus indicates huge inflow of investments. These investments would cause the currency to appreciate,which reduces exports and encourages imports leading to a trade deficit.