ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It can be balanced, show a surplus, or show a deficit
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Exports create a financial account debit
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Remittances (cash transfers) create a financial account debit
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Funds coming into a country are debits to the account, funds leaving the country are credits to the account.
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Imports create a financial account credit
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Detailed explanation-1: -Answer and Explanation: The answer is c). The two accounts in the balance of payment system are the current account and capital account.
Detailed explanation-2: -A surplus on the financial account means that there are more investment funds flowing into the country than flowing out. These inflows may be to fund a deficit on the current account of the balance of payments. Inward investment may help create jobs and boost growth, but anyone investing in an economy expects a return.
Detailed explanation-3: -When the foreign exchange is being sold by the reserve bank when there is a deficit, it is known as official reserve sale. The decrease or increase in official reserves is known as the overall balance of payments deficit or surplus.
Detailed explanation-4: -Statement 3 is correct: The Balance of Payments (BoP) includes both the current account and capital account, in the capital account there is the nation’s imports and exports of capital and foreign aid.