Question

A current account surplus arises when receipts and payments stand in which relation, and what does it imply about the country?

Options

• Receipts = Payments; there is no net lending or borrowing

• Receipts < Payments; the country is a net borrower

• Receipts > Payments; the country is a net lender

• Imports > Exports; the country is a net borrower

Answer 1

A current account surplus exists when Receipts > Payments. In this situation the country is a net lender to the rest of the world, since it receives more from abroad than it pays out to it.