A country with a current account surplus
A)acquires IOUs from foreigners,thereby increasing its net foreign wealth.
B)must borrow from foreigners or draw down on its previously accumulated foreign wealth.
C)will experience a reduction in the country's net foreign wealth.
D)must borrow from foreigners or draw down on its previously accumulated foreign wealth and will experience a reduction in the country's net foreign wealth.

Question

Quizplus · Accepted Answer

A country with a current account surplus means that the value of its exports exceeds the value of its imports. As a result, the country receives more money from foreigners than it spends on foreign goods and services. This surplus amount is often used to purchase foreign assets, such as stocks or bonds, which results in an increase in net foreign wealth. Therefore, choice A is correct. Choices B, C, and D are incorrect as they all suggest a reduction in net foreign wealth, which contradicts the definition of a current account surplus.

A Country with a Current Account Surplus