Under the simplifying assumptions made in the text, a current account surplus exists when
A) net exports are positive.
B) net exports are negative.
C) financial flows out of a country for goods and services exceeds financial flows into the country for its goods and services.
D) imports exceed exports.

Question

Quizplus · Accepted Answer

A current account surplus exists when net exports are positive, meaning that a country's exports exceed its imports in value. This translates to a surplus in the balance of trade, which leads to a surplus in the current account. The other options are incorrect as they either describe a deficit in the current account (B and D) or refer to financial flows instead of trade flows (C).

Under the Simplifying Assumptions Made in the Text, a Current