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Economics explained


Balance of payments

Causes of a current account surplus

Causes of a current account surplus

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If inflows of money (from the sale of exports, etc.) exceed outflows of money (from the purchase of imports, etc.) there is a current account surplus. This means the country will have a positive balance on its current account.

Causes of a current account surplus

A surplus on the current account can occur due to a combination of two factors:

Higher demand for exports

This could be caused by

an improvement in competitiveness
higher incomes in overseas markets- foreign buyers have more money to spend on the country's exports
a lower exchange rate which makes exports less expensive for foreign buyers

Reduced demand for imports

This could be caused by a lower exchange rate which makes it more expensive to buy imports inflation in overseas countries causes imports to be more expensive

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