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 means that a country is exporting more goods and services than it is importing, resulting in more inflows of foreign currency. This can lead to a higher demand for the domestic currency, increasing its value. If domestic savings can be invested more profitably abroad, this can attract more foreign investment and increase economic growth. Thus, a current account surplus may pose no problem if domestic savings are being invested more profitably abroad than they would be at home. Option A and E are incorrect because they only consider investment less profitably abroad and not more profitably. Option D is incorrect because there is a relation between current account surplus and savings and investment. Option C is not necessarily true because domestic savings could be invested more profitably abroad even with a current account surplus.

A Current Account Surplus