What does a current account surplus indicate?

A current account surplus indicates that a country is earning more from its exports than it is spending on imports. This is illustrated by the concept of trade balance, which is a key component of the current account. When a country has a surplus, it signifies that there is a greater flow of income entering the country from international trade, as the value of goods and services sold abroad exceeds the value of goods and services purchased from other countries.

In this context, a current account surplus can also reflect stronger foreign demand for a nation’s products, which can be beneficial for the country's economy by supporting domestic production and potentially leading to higher employment rates. A surplus can also indicate effective competitiveness of domestic industries in the global market.

In contrast, the other options present scenarios that do not align with the definition of a current account surplus. Higher imports than exports would lead to a current account deficit, equal imports and exports would result in balance, and negative net income flows imply that the country is losing more income abroad than it is receiving, which does not align with the notion of a surplus.