GENERAL KNOWLEDGE

Detailed explanation-1: -A surplus in the current account offsets a deficit in the capital account. If a country exports goods and services, a current account surplus, it imports foreign financial assets, a capital account deficit. In contrast, a deficit in the current account offsets a surplus in the capital account.

Detailed explanation-2: -Current account deficits are offset by capital account surpluses. 6. The balance of trade is the merchandise exports minus the merchandise imports.

Detailed explanation-3: -A current account deficit is likely to imply a trade deficit. That means more goods and services are flowing into the country than are flowing out. A capital account surplus means more spending is flowing into the country for the purchase of assets than is flowing out.

Detailed explanation-4: -A current account surplus means that a country has more exports and incoming payments than imports and outgoing payments to other countries. It is generally deemed a positive because the current account surplus adds to a country’s reserves.