economics medium mcq

A deficit in the Current Account of the Balance of Payments (BOP) implies that:

  1. Foreign exchange reserves are increasing
  2. The country's exports of goods and services exceed its imports
  3. The country's imports of goods and services exceed its exports
  4. FDI inflows are higher than FDI outflows

Answer: The country's imports of goods and services exceed its exports

The Current Account records trade in goods and services, plus transfer payments. A deficit means the nation is spending more foreign currency on imports and remittances than it is earning through exports. This deficit must be financed by a surplus in the Capital/Financial Account (e.g., borrowing or FDI).

Topic International Economics - BOP
Exam Relevance UPSC Prelims, SSC CGL, Banking

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