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.

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