when a country has a trade surplus what are the ways in which the country invests its surplus?

Question

surplus country can loan it to the country, invest in assets and what else it can do?

Answer 1

Well, you have to remember that globally, investment = savings.

Here's the long-winded answer:

A trade surplus is caused when investment opportunities in your country are less attractive than savings opportunities ----- thus, you save more than you invest domestically. This causes interest rates to drop domestically (in order to correct this imbalance) to make savings more attractive. Lower interest rates cause capital flows to go abroad, which increases the amount of your currency on the foreign market.

In the end, this causes your net exports to increase, and causes a trade surplus.


So with a trade surplus, the "money" doesn't get invested in anything in particular. It is a function, essentially, of differing interest rates and investment opportunities across borders.

If you have low interest rates and attractive investment, you're typically going to run a trade deficit; and vice versa.

Answer 2

A trade surplus is just a mathematical sum resulting from the fact that lots of individual companies within a country export goods. It's not like some finance officer is sitting there collecting the "surplus" and saying "Wow what do we do with all this cash?". So your question is merely, what does any company do with its revenue? It doesn't matter to them whether they sold goods domestically or exported -- either way they just care about getting their revenue.

And so they do what companies do with money -- they pay salaries, buy staplers and desks, make capital investments either foreign or domestic. If they they have so much cash they can't put it all to work, then they park money in "cash and cash equivalents", such as treasury bonds and money market instruments.

Answer 3

First, the principal component selecting the extent of overseas debt is internet export. When a nation imports extra and exports much less, foreigners will maintain its foreign money, and they'll use the money to shop for the international locations' treasury bonds (possibly different investments). From the view of economics, foreigners lend cash to that nation. You are not able to borrow from or lend to a further nation except there's a alternate imbalance. The international locations with a internet foreigh surplus are the ones international locations with internet export, like Japan China India Russian Oil-pruducing international locations

Answer 4

it could just hoard the cash