Question

When credit balance in invisibles account is greater than the debit balance in merchandize account, there is a ____________.

• A. Capital account surplus
• B. Current account surplus
• C. Current account deficit
• D. Capital account deficit
• E. None of the above

Answer 1

The correct option is B Current account surplus

The invisible account includes investment income, tourism, financial charges and transportation expenses. The merchandise account includes exports and imports. The balance of current account reflects the net flow of goods, services ad unilateral transfer. Hence when credit balance in invisible account is greater than the debit balance in merchandise account, there is a current account surplus.