Based on the following information, what is the balance on the current account? Exports of goods and services = $12 billion Imports of goods and services= $14 billion Net income on investments = minus$4 billion Net transfers = minus$1 billion Increase in foreign holdings of assets in the United States = $6 billion Increase in U. S. holdings of assets in foreign countries = $3 billion A. minus$7 billion B. minus$3 billion C. minus$2 billion D. $1 billion

-$7billion

Explanation:

Given that

Exports of goods and services=$12 billion

Imports of goods and services=$14 billion

Net income on investments= -$4 billion

Net transfers= -$1 billion

Increase in foreign holdings of assets in the United States= $6 billion

Increase in U.S. holdings of assets in foreign countries= $3 billion

Recall that

CAB = (X - M) + NY + NCT

Where

X = export

M = import

CAB = current account balance

NY = net income from abroad

NCT = net current transfers

Therefore

CAB = (12 - 14) - 1 - 4

= - $7 billion

The answer is A. -$7billion

Explanation:

From the question above, we have the following parameters:

Exports of goods and services=$12 billion

Imports of goods and services=$14 billion

Net income on investments= -$4 billion

Net transfers= -$1 billion

Increase in foreign holdings of assets in the United States= $6 billion

Increase in U.S. holdings of assets in foreign countries= $3 billion

The formula for calculating Current Account Balance is given as:

CAB = (X - M) + NY + NCT

Where

CAB = current account balance

X = export

M = import

NY = net income from abroad

NCT = net current transfers

Therefore, we have:

CAB = (12 - 14) - 1 - 4 = - $7 billion.

Therefore, our answer is A.

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