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AP® Macroeconomics

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Moderate

Effect of Inflation on Balance of Payments Accounts

APMACR-8HYE3S

Consider the following situation:

An increase in inflation in the United States as shown in the graph of aggregate supply and aggregate demand would cause which of the following changes in the United States balance of payments accounts?

A

The United States would move towards a current account deficit and a financial account surplus.

B

The United States would move towards a current account surplus and a financial account deficit.

C

The United States would move towards a current account deficit and a financial account deficit.

D

The United States would move towards a current account surplus and a financial account surplus.

E

The United States would experience no changes in its current account or financial account.