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Not influenced by capital account alone. You must take into consideration current account as well.

A surplus in capital ac. means that there has been an inflow of funds for investments. This inflow has exceeded the outflow. The inflow has been balanced by ownership of resources. The "surplus" may eventually lead to an outflow and international indebtedness, when the "investments" start producing gains which can be remitted back o/s.

2007-09-17 20:13:34 · answer #1 · answered by jemhasb 7 · 0 1

In an ideal world, the capital account plus the current account balance must sum to zero. So, you do not need to know anything else about the current account.

In the real world, however, we cannot always measure all trade -- exporters and importers try to bypass customs and there are incentives for tax reasons to misreport trade values.

However, to make things simple, let's stick to the ideal world. A capital account surplus means that there is a current account deficit. Both of these indicate that the country's indebtedness is increasing.

2007-09-19 10:32:43 · answer #2 · answered by Allan 6 · 0 0

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