Question : When a country experiences a surplus in its capital account, it means that:
Option 1: It is exporting more goods than it is importing
Option 2: It is receiving more foreign aid than it is providing
Option 3: It is borrowing more from foreign sources than it is lending
Option 4: It is earning more income from its foreign investments than it is paying out
Correct Answer: It is earning more income from its foreign investments than it is paying out
Solution : The correct answer is (d) It is earning more income from its foreign investments than it is paying out.
When a country experiences a surplus in its capital account, it means that the country is receiving more income from its foreign investments than it is paying out. The capital account records capital flows, which include investments, loans, and changes in a country's foreign assets and liabilities.
A surplus in the capital account suggests that the country is earning more income from its investments abroad, such as dividends, interest, or profits, than it is paying out to foreign investors who have invested in the country. This can indicate that the country's investments abroad are yielding positive returns.
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