Implications of a Current Account Surplus (HL only)
Balance of Payments
Syllabus requirement
Explores macroeconomic impacts like reduced domestic consumption, inflation, employment, export competitiveness and currency appreciation.
Summary
This topic explains what a current account surplus is and the wider balance of payments components related to it at higher level. It clarifies the four parts of the current account (goods, services, income and transfers), the capital account (capital transfers and transactions in non-produced, non-financial assets) and the financial account (FDI, portfolio investment, reserve assets and official borrowing). Understanding these components shows how trade, investment and reserve movements interact and why a current account surplus matters for exchange rates, reserves and cross-border capital flows.