ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A higher interest rates
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B higher investment spending
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C higher tariffs
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D higher taxes
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Detailed explanation-1: -Exports, earnings on investments abroad, and incoming transfer payments (aid and remittances) increase a country’s current account surplus. Imports, foreign investors’ earnings on investments in the country, and outgoing transfer payments lower a country’s current account surplus.
Detailed explanation-2: -Balance of payments surplus occurs when a country’s total exports are higher than its imports. This helps to generate capital to fund its domestic productions.
Detailed explanation-3: -A current account surplus has a positive impact on the currency value (rupee). Surplus current account means that the rest of the world owes India money in rupees, meaning they would buy rupee and sell foreign currencies, leading to an appreciation of the rupee value.
Detailed explanation-4: -Trade deficits and surpluses in the balance of payments A trade surplus exists if a country exports more than it imports. A trade deficit exists if a country exports less than it imports.