The Balance of Payments in a Small Country
A balance of payments is a record of all monetary transactions between a country and the rest of the world. It includes the current account balance, which is the difference between a country's savings and its investments, as well as government purchases and net tax revenues.
Given Data:
- Private saving: $4 million
- Investment: $10 million
- Government purchases: $6 million
- Net tax revenues: $15 million
Based on the given data, we need to calculate the current account balance for this small country.
What is the current account balance for this small country?Final answer:
The current account balance for the small country is a surplus of $3 million.
Explanation:
The current account balance for a small country can be calculated using the formula: Current Account Balance = Private Saving + Government Purchases + Net Tax Revenues - Investment. Using the given information, the current account balance is calculated as follows: Current Account Balance = $4 million + $6 million + $15 million - $10 million = $15 million. Therefore, the correct answer is option 1) Surplus of $3 million.