Hi,
A silly question on country’s balance of payments.
Current Account = 100, Financial Account = -40, Official Reserve Account = -60, Total sum = 0
I understood that change in official reserve maintains the balance to 0.
When there is a trade surplus of 100-40 = 60, why would it decrease the Official reserve account by 60? I didn’t understand the true intent of that -ve sign?
In case of trade deficit, the official reserve will supply the funds and -ve sign makes sense. But there is a trade surplus here? Any thoughts?
Thank you.