Question : If a country receives more income from its foreign investments than it pays to foreign investors, it will have a:
Option 1: Current account surplus
Option 2: Current account deficit
Option 3: Capital account surplus
Option 4: Capital account deficit
Correct Answer: Current account surplus
Solution : The correct answer is (a) Current account surplus.
The income from foreign investments, such as dividends and interest, is recorded in the current account of the Balance of Payments. When a country receives more income from its foreign investments (inflows) than it pays to foreign investors (outflows), it results in a current account surplus. This indicates that the country is earning more from its overseas investments than it is paying out to foreign investors.
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