Question

Surplus in capital account means ________.

• A. investment more than savings
• B. saving more than investment
• C. saving equals investment
• D. none of these

Answer 1

The correct option is B saving more than investment

Balance of capital account refers to the balance of capital transfers - borrowing and lending from abroad and sales and purchases of assets (export and import of capital), gold and foreign exchange from other countries. It is in equilibrium when domestic and foreign saving and investment are equal. Thus a surplus implies that savings in the country exceed investments abroad.