Balance of Payments Surplus Law and Legal Definition
Balance of Payments Surplus is an imbalance in a nation's balance of payments in which payments made by the country are less than payments received by the country. This is also termed a favorable balance of payments. It is considered favorable because more currency is flowing into the country than is flowing out. Such an unequal flow of currency will expand the supply of money in the nation and subsequently cause a decrease in the exchange rate relative to the currencies of other nations. This then has implications for inflation, unemployment, production, and other facets of the domestic economy. A balance of trade surplus is often the source of a balance of payments surplus, but other payments can turn a balance of trade surplus into a balance of payments deficit.