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?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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