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Question
Microeconomics
Posted 2 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 It will experience a financial account balance
(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) The financial account will move to a surplus
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Answer from Sia
Posted 2 months ago
Solution
a
Current Account Definition: The current account records a country's transactions with the rest of the world, including net trade in goods and services, net earnings on cross-border investments, and net transfer payments
b
Impact of Increased Exports: If Wakanda begins to export more than it imports, the value of its exports will exceed the value of its imports. This will result in a positive net export value
c
Current Account Surplus: A positive net export value means that the current account will move to a surplus, as the country is earning more from its exports than it is spending on imports
Answer
(B) The current account will move to a surplus
Key Concept
Current Account Surplus
Explanation
When a country exports more than it imports, it earns more from its exports than it spends on imports, leading to a surplus in the current account.

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