ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A alternate annual deficits and surpluses in the current account
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B a continually growing balancing item
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C a large short-term outflow of foreign direct investment
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D a persistent rise in foreign currency reserves
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Detailed explanation-1: -When a country’s current account is at a deficit or surplus, its balance of payments (BOP) is said to be in disequilibrium. A country’s balance of payments is a record of all transactions conducted with other countries during a given time period.
Detailed explanation-2: -Disequilibrium is when the market fails to find an equilibrium point-which is the state of a market when there are no shortages or surpluses of supply and demand at a market-clearing price (this is also referred to as equilibrium price).
Detailed explanation-3: -A country is said to be having its balance of payment in equilibrium when the sum of its current account and non-reserve capital account equals zero, which means the current account deficit is financed entirely by international borrowings without any movement in the country’s official reserves.
Detailed explanation-4: -Fixed prices. Government intervention. Tariffs and quotas. Minimum wage. Current account deficit/surplus. Pegged currencies. Inflation or deflation. Changing foreign exchange reserves. Population growth. Political instability. Trade wars. Price wars. 22-Dec-2022