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Does a trade surplus mean an overall inflow or an overall outflow of financial capital to an economy?

1) Overall inflow
2) Overall outflow

User Mkounal
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Final answer:

The correct answer is option 2. A trade surplus means an overall outflow of financial capital from an economy to other countries, while a trade deficit means an overall inflow of financial capital to an economy.

Step-by-step explanation:

A trade surplus means an overall outflow of financial capital from an economy to other countries. This occurs when a country exports more goods and services than it imports, resulting in a positive balance of trade. The excess revenue from exports can be used to invest in other countries.


On the other hand, a trade deficit means an overall inflow of financial capital from abroad to an economy. It occurs when a country imports more goods and services than it exports, resulting in a negative balance of trade. To cover the deficit, the country must borrow or receive investments from foreign entities.

User Saad Ali
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