What does a surplus in the balance of payments indicate?

JAMB Commerce 2023 298 views
Source: JAMB · 2023

What does a surplus in the balance of payments indicate?

  1. The country is spending more on imports than it earns from exports.
  2. The country is earning more from exports than it spends on imports. ✓
  3. The country has a negative net income from foreign investments.
  4. The country has a balanced trade with no surplus or deficit.
Explanation

The balance of payments records money flowing in and out of a country. A surplus means more money comes in than goes out.

So the country earns more from exports than it spends on imports. The opposite situation is called a deficit.

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