Suppose the current account of a country is initially in balance. A new transaction occurs so that the current account is now in surplus. Official reserve balance is maintained before and after the transaction occurs. From this, we know that

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A current account surplus implies that the country is exporting more than it is importing, leading to a net inflow of foreign currency. To maintain the official reserve balance, the financial account must be in deficit, indicating that the country is investing more abroad or receiving less foreign investment.

Suppose the Current Account of a Country Is Initially in Balance