If equilibrium is present in the foreign exchange market and a nation is experiencing a trade surplus,
A) the nation must be experiencing a net capital inflow.
B) the nation must be experiencing a net capital outflow.
C) the nation's inflation rate must increase.
D) the nation's interest rate must increase.

Question

Quizplus · Accepted Answer

A trade surplus implies that the nation is exporting more than it is importing, which typically results in a net capital outflow as the surplus funds are invested abroad.

If Equilibrium Is Present in the Foreign Exchange Market and a Nation