The Causes of a Surplus on the Current Account of the Balance of Payments
- This occurs when a country’s revenue abroad is greater than its expenditure abroad.
- A surplus on trade in goods on services could occur in several different ways, like the state of the economy or a change in exchange rates.
- If the quality of goods and services is high and they’re produced at a low cost and they’re what consumers at home and abroad want to buy, then a surplus is likely to occur
- Likewise, a fall in the exchange rate would mean the value of the currency lowest export prices and raises import prices.
- A surplus could occur, however, if the country was in a recession, as domestic firms would find it difficult to sell their products at home, and so would work on exporting more.