Question

Is it better for your country to be an international lender or borrower?

Short answer

It is better for your country to be an international lender.

Step-by-step solution

Step 1. International capital movement

The movement or of financial assets from one country to some other both for the adjustment of BOP disequilibrium or for increasing the production frontier in a country denotes international capital flow or movement.

Step 2. Explanation

It is better for a country to be a lender because a lender would have a trade surplus. Because the trade balance and the international flow of financial capital are so closely led, trade surpluses result in inflows of the domestic currency. The inflow of domestic currency from surplus product exports, which is used by the country for lending purposes. The lending country can also receive interest payments on the amount lent.