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Question
Surplus in capital account means ________.
Surplus in capital account means ________.
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Solution
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.
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.
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