Answer to Question #60446 in Economics for Doltsee

Question

Explain the fact that balance of payments surplus means excess of central bank credit
over the demand for real money balances in the economy.

Answer 1

When the central bank sells domestic currency and buys foreign currency in the Forex, the transaction indicates a balance of payments surplus.
Central bank transactions are recorded in an account titled official reserve transactions. It is found in the financial account of the balance of payments. If this account indicates an addition to official reserves over some period, then the country is running a balance of payments surplus.