Question

Which of the following is true of a current account surplus?​

​A country that is running a current account surplus will have negative net exports.

​A current account surplus means that a country is also running a net surplus in its financial account.

​A country can have a current account surplus only if it exports more services as compared to goods.

​A country that is running a current account surplus buys more bonds from the rest of the world as compared to what it sells.

Answer 1

The current account measures international trade of goods and services.

When there is current account surplus, it means export of goods and services are more than the import of goods and services.

Since a current account surplus means more availability of fund in the domestic country, it means with this fund foreign bond can be purchased. Since there is surplus, it means purchase of foreign bonds will be more than the sell of domestic bonds.

Hence in case of current surplus ​a country that is running a current account surplus buys more bonds from the rest of the world as compared to what it sells.

Hence option fourth is the correct answer.