A balance of payments surplus occurs when a country experiences a _______ that is not matched by additional purchases of _______ by the private sector.

Question

Quizplus · Accepted Answer

A balance of payments surplus occurs when a country has a current account surplus, which is when the value of its exports exceeds the value of its imports. This surplus can be matched by additional purchases of foreign assets by the private sector, which would contribute to a financial account surplus. However, if the private sector does not make these additional purchases, the surplus remains as a current account surplus. Therefore, option A, which refers to a current account surplus not being matched by additional purchases of foreign assets by the private sector, is the correct answer. Option B is incorrect because government issued debt is not related to the current account surplus. Option C is incorrect because it refers to a financial account surplus rather than a current account surplus. Option D is incorrect because the purchases of home made goods and services do not affect the balance of payments surplus.

A Balance of Payments Surplus Occurs When a Country Experiences