📚 Learning Guide
Current Account Balance Dynamics
easy

Which of the following best describes the impact of a surplus in the current account on a country’s economy?

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

It indicates that the country is spending more on foreign goods than it is earning from exports.

B

It suggests that the country is earning more from exports than it is spending on foreign goods.

C

It has no significant impact on the country's gross domestic product.

D

It means that the country is experiencing high levels of inflation.

Understanding the Answer

Let's break down why this is correct

Answer

A surplus in the current account means that a country is earning more money from its exports and investments than it is spending on imports. This can be a positive sign for the economy because it indicates that the country is producing goods and services that are in demand internationally. For example, if a country exports a lot of technology products, the income from these sales can be used to invest in infrastructure or education, helping the economy grow. However, a large surplus might also lead to trade tensions with other countries, as they may feel it creates an unfair advantage. Overall, while a current account surplus can strengthen the economy, it must be managed wisely to avoid potential negative consequences.

Detailed Explanation

A surplus means the country sells more goods to other countries than it buys. Other options are incorrect because This option confuses spending with earning; This answer misses the point of how a surplus can boost the economy.

Key Concepts

economic indicators
Topic

Current Account Balance Dynamics

Difficulty

easy level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.