A US citizen buys a \$60,000 car from a German company. How does this transaction affect the balance of payments?

• A. It increases the current account deficit by \$60,000 and increases the financial account surplus by \$60,000.
• B. It decreases the current account surplus by \$60,000 and decreases the financial account deficit by \$60,000.
• C. It has no effect on the balance of payments.
• D. It increases the current account surplus by \$60,000 and decreases the financial account deficit by \$60,000.

Answer: (A)