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    Question

    Consider the following statements about the balance of

    payments (BoP): 1. BoP records all transactions between residents of a country and the rest of the world. 2. A current account surplus means a country imports more goods than it exports. 3. BoP always balances as it includes current account, capital account, and errors and omissions. Which of the above statements are correct?
    A 1 and 3 only Correct Answer Incorrect Answer
    B 2 and 3 only Correct Answer Incorrect Answer
    C 1 and 2 only Correct Answer Incorrect Answer
    D 1, 2, and 3 Correct Answer Incorrect Answer

    Solution

    BoP records all international transactions (statement 1). A current account surplus indicates more exports than imports (statement 2 is incorrect). By definition, BoP always balances (statement 3).

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