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Question
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Posted 5 months ago
The current account in Wakanda is currently balanced.
Which of the following will occur in the balance of payments if Wakanda begins to export more than it imports?
Choose 1 answer:
(A) The financial account will move to a surplus
(B) The current account will move to a surplus
(C) The current account will equal zero
(D) The current account will move to a deficit
(E) It will experience a financial account balance
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Answer from Sia
Posted 5 months ago
Solution by Steps
step 1
Understand the concept of the current account and balance of payments: The current account reflects a country's net income, including the balance of trade (exports minus imports), net income from abroad, and net current transfers. A balanced current account means that the value of exports and imports is equal
step 2
Analyze the impact of increased exports: If Wakanda begins to export more than it imports, the value of exports will exceed the value of imports, leading to a surplus in the current account
step 3
Determine the effect on the balance of payments: Since the balance of payments is a broader measure that includes the current account, a surplus in the current account will contribute positively to the balance of payments
Answer
B
Key Concept
Current Account Surplus
Explanation
When a country exports more than it imports, it generates a surplus in the current account, which positively affects the balance of payments.
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