Edita Lives in a Country That Is Experiencing Rapidly Expanding

Multiple Choice

Edita lives in a country that is experiencing rapidly expanding current account deficits. Which of the following is likely also happening simultaneously as a result of the inverse relationship between current and financial accounts?

A) Large amounts of capital are flowing into the country
B) Scarce amounts of capital are flowing into the country
C) The government establishes a floating exchange rate
D) The government establishes a fixed exchange rate
E) The country is going into debt