Question

When it is reported that a nation is experiencing a "balance of payments deficit," this is best interpreted to mean that the nation is experiencing?

Answer 1

When it is reported that a nation is experiencing a "balance of payments deficit," this is best interpreted to mean that the nation is experiencing? If it is reported that the nation is experiencing a balance of payments deific, the country is importing more goods, services and capital than it is exporting. When this happens, the nation has to borrow funds and items from other countries to help pay for what they are importing until the have the cash funds to pay for them, themselves. When this starts the happen, the nation that this is hurting should try and balance their payments and monitor transactions better to eliminate this in the future. 

Answer 2

The nation is experiencing ‘balance of payment deficit’ means that a decrease in foreign exchange reserves.

Further Explanation:

Balance Of Payments(BOP): It refers to the country's statistical record of international transactions that have taken place over a period of time represented or prepared in the double-entry bookkeeping format. It is useful because:

• It provides the information about the demand and supply of the currency.
• It is useful for the evaluation of the country's financial performance.

The balance of payment can either be surplus or deficit. If the balance of payment is surplus, then it means that the country export more services and goods than its import.The balance of payment deficit means that the country's imports are more than its export. It implies that the foreign exchange reserve is decreasing because the country is importing more than it is exporting.  

Therefore,the nation is experiencing a 'balance of payment deficit' means that its foreign exchange reserves are decreasing or depleting.

Learn more:

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Answer details:

Grade: High School

Subject: Economics

Chapter: Balance of payment

Keywords: Balance of payment, surplus, deficit, decrease in foreign exchange reserves, foreign exchange reserves .