A current account surplus
A) poses a problem if domestic savings are being invested more profitably abroad than they would be at home.
B) may pose no problem if domestic savings are being invested more profitably abroad than they would be at home.
C) may pose no problem if domestic savings are being invested less profitably abroad than they would be at home.
D) There is no relation between current account surplus and between savings and investment.
E) poses a problem if domestic savings are being invested less profitably abroad than they would be at home.

Question

Quizplus · Accepted Answer

A current account surplus occurs when a country exports more goods and services than it imports. This means that it is earning more income from abroad than it is spending on foreign goods and services. This surplus can be invested either domestically or abroad. If domestic savings are being invested more profitably abroad than they would be at home, then this is not a problem because the country is maximizing its return on investment. However, if domestic savings are being invested less profitably abroad than they would be at home, then this poses a problem because the country is not getting the most out of its resources. Therefore, option B is correct.

A Current Account Surplus