Impact of Trade and Investments on Balance of Payments

Hard International Economics Balance Of Payments

A country's balance of payments (BOP) is a financial statement that summarizes its transactions with the rest of the world during a specific time period. It includes two main accounts: the current account, which reflects trade in goods and services, and the capital account, which records financial transactions.

In 2022, Country X experienced an increase in its exports due to a rise in global demand for its technological products. Simultaneously, the country invested heavily in foreign real estate. Considering these developments, which of the following statements accurately describes the impact on Country X's balance of payments?

Country X's current account will improve due to increased exports, while its capital account will show a deficit due to foreign investments.

Country X's capital account will improve as it invests in foreign assets, and its current account will deteriorate due to increased imports.

Country X will see both its current and capital accounts improve as exports rise and foreign investments increase.

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