Governments prefer to avoid excessive current account surpluses because
A) the returns to domestic savings are more difficult to tax than those on assets abroad.
B) an addition to the home capital stock may increase domestic unemployment and therefore lead to higher national income.
C) foreign investment in one firm may have beneficial technological spillover effects on other foreign producers that the investing firm does not capture.
D) an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income.
E) domestic savings increase with more investment abroad.

Question

Quizplus · Accepted Answer

Excessive current account surpluses can indicate that a country is not investing enough domestically, which could lead to underutilization of resources and higher unemployment. By investing more at home, a country can reduce unemployment and increase national income.

Governments Prefer to Avoid Excessive Current Account Surpluses Because