What happens if the trade balance is in surplus by more than a nation's service payments on its external debt?
A) The nation's net external wealth declines.
B) The nation's net external wealth increases.
C) The nation's net external wealth is constant.
D) The nation must run a trade deficit during the subsequent period.

Question

Quizplus · Accepted Answer

When the trade balance is in surplus by more than a nation's service payments on its external debt, it means that the nation is earning more from its exports than it needs to pay for servicing its debt. This will lead to an increase in the nation's net external wealth as it will accumulate more foreign assets than foreign liabilities.

What Happens If the Trade Balance Is in Surplus by More