Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What does a balanced balance-of-payments aim to achieve as a macroeconomic objective?

1. A surplus on international trade

2. A deficit in government spending

3. A stable currency value

4. Equilibrium between exports and imports

The correct answer is: Equilibrium between exports and imports

A balanced balance-of-payments aims to achieve equilibrium between exports and imports, which is essential for maintaining economic stability. When exports and imports are balanced, it indicates that a country is not excessively borrowing from the rest of the world nor is it lending too much. This balance helps to ensure that a country can finance its trade deficits with its surpluses, thus supporting stable economic growth without causing inflationary pressures or affecting the currency value negatively. Achieving equilibrium in the balance-of-payments also helps maintain confidence among investors and trading partners, as it reflects sound economic management. This stability is crucial for long-term investment and economic planning, allowing for sustainable growth. Without a balanced approach, a country may face a trade imbalance, which can lead to larger economic issues such as currency devaluation and increased debt levels. The other options relate to different aspects of economic management but do not directly align with the primary goal of the balance-of-payments, which centers on the relationship of exports to imports. A surplus on international trade, for instance, may be beneficial, but it does not necessarily reflect a balanced situation. Similarly, a deficit in government spending and stable currency value are important objectives but fall outside the specific aim of balancing the payments between trade flows.