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JAMB Economics 1998 Question 48

Question 48

Balance of Payments and Exchange Rates

If a country has a balance of payments surplus on current account this means that

  1. A.total invisible export is greater than invisible import
  2. B.the value of goods exported must be greater than the value of goods imported
  3. C.there must be a positive balance on capital account
  4. D.the aggregate of the balance of trade and the invisible balance must be positive.
Show the answer and explanation

Answer: D (the aggregate of the balance of trade and the invisible balance must be positive.)

Explanation

The current account is the balance of trade (goods) plus the invisible balance (services, income, transfers); a surplus means their total is positive, even if one of them is negative.