Hey, can someone provide a detailed explanation on why is the answer option (2)?
ID: 1112759 • Letter: H
Question
Hey, can someone provide a detailed explanation on why is the answer option (2)?8) A country that runs a trade surplus this year has a positive net financial inflow this year. has bought more foreign assets this year than foreigners have bought its assets. has zero net financial outflow this year. is in effect borrowing from the rest of the world this year. Your Answer: has a positive net financial inflow this year. Gerrect Answer: has bought more foreign assets this year than foreigners have bought i
Explanation / Answer
Your answer is right.Right answer is A.It can not be B because lending to foreign countries(by purchasing their assets ) is negative item or debit in balance of payments.On the other hand lending by foriegn countries to home countries(foriegn citizens purchasing domestic assets) is positive item.so if the country has purchased more foriegn assets than foriegners have brought it's assets,then there will be deficit in balance of payments and not surplus.So B is not right answer