Question

During the 1980s, the United States imported a lot more consumer products from Japan than Japan imported from the United States. At the same time, Japanese individuals and firms purchased a lot more real estate and bonds in the United States than U.S. individuals and firms purchased in Japan. According to this information, by the end of the 1980s:

A. the U.S. capital account was surplus, and the Japanese current account was in surplus.
B. the U.S. capital account was in surplus, and the Japanese current account was in deficit.
C. the U.S. current account was in deficit, and the Japanese capital account was in surplus.
D. the U.S. current account was in surplus, and the U.S. capital account was in deficit.
E. the U.S. capital account was in deficit, and the Japanese current account was in surplus.​

Answer 1

Based on the given information, the correct answer is option E. The U.S. capital account was in deficit, and the Japanese current account was in surplus. This is because Japanese individuals and firms purchased a lot more real estate and bonds in the United States than U.S. individuals and firms purchased in Japan, resulting in a U.S. capital account deficit and a Japanese current account surplus.