| I. Reverse account balance makes an adjustment between current account balance and capital account balance. |
| II. If surplus in the Capital Account is more than deficit in the Current Account, there is net increase in the Forex Reserves of the country at the end of the year. |
| III. If deficit in the current account is more than surplus in the Capital Account then there is net decrease in Foreign Reserves of the country at the end of the year. |
A) I & II
B) I & III
C) Only II
D) All the above
Correct Answer: D
Solution :
If surplus in the Capital Account is more than deficit in the Current Account, there is net increase in the Forex Reserves of the country at the end of the year. On the other hand if deficit in the current account is more than surplus in the Capital Account then there is net decrease in Foreign Reserves of the country at the end of the year.
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