Question : When a country experiences a surplus in the financial account of the Balance of Payments, it indicates that:
Option 1: It is earning more income from its foreign investments than it is paying out
Option 2: It is receiving more foreign aid than it is providing
Option 3: It is exporting more goods than it is importing
Option 4: It is borrowing more from foreign sources than it is lending
Correct Answer: It is earning more income from its foreign investments than it is paying out
Solution : The correct answer is (a) It is earning more income from its foreign investments than it is paying out.
The financial account of the Balance of Payments records transactions related to changes in ownership of financial assets and liabilities between residents and non-residents. A surplus in the financial account means that a country is receiving more income from its foreign investments, such as dividends, interest, and profits, than it is paying out to foreign investors.
