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Questions
Explain the meaning of balance of payments deficit.
Explain the concept of ‘deficit’ in balance of payments.
Explain
Solution
- A deficit in the balance of payments is when receipts of the country coming from autonomous transactions are less than the corresponding payments to the rest of the world during the period of an accounting year. It shows net liabilities towards the rest of the world.
- There are certain positive and negative impacts of the deficit in the balance of payment. When deficit occurs on account of capital import which is required for advancing the process of growth and development, it is a positive impact of the deficit in the balance of payment. The negative impact is that it shows Indian liabilities to the rest of the world. These liabilities strain the GDP by making payments to the rest of the world.
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Balance of Payments Deficit Meaning
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RELATED QUESTIONS
Balance of Payments ‘deficit’ is the excess of: (choose the correct alternative)
a. Current account payments over current account receipts.
b. Capital account payments over capital account receipts.
c. Autonomous payments over autonomous receipts.
d. Accommodating payments over a accommodating receipts.
Answer the following question.
What is meant by a trade deficit?
