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    Question

    Which of the following is true for Balance of balance

    of payment Deficit? i. In case of a balance of payments deficit means, the country imports more goods, services and capital than it exports ii. It must borrow from other countries to pay for its imports. iii. In the short-term, that fuels the country's economic growth.
    A Only i & ii Correct Answer Incorrect Answer
    B Only ii & iii Correct Answer Incorrect Answer
    C Only i Correct Answer Incorrect Answer
    D Only ii & iii Correct Answer Incorrect Answer
    E All of these are correct Correct Answer Incorrect Answer

    Solution

    The balance of payments is the record of all international financial transactions made by a country's residents. A country's balance of payments tells you whether it saves enough to pay for its imports. It also reveals whether the country produces enough economic output to pay for its growth. The BOP is reported for a quarter or a year. In case of a balance of payments deficit means the country imports more goods, services and capital than it exports. It must borrow from other countries to pay for its imports. In the short-term, that fuels the country's economic growth. In the long-term, the country becomes a net consumer, not a producer, of the world's economic output. It will have to go into debt to pay for consumption instead of investing in future growth. If the deficit continues long enough, the country may have to sell off its assets to pay its creditors. These assets include natural resources, land and commodities.

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