If a nation’s balance of payments is always in balance, why isn’t it also always in equilibrium?
What will be an ideal response?
Official bank reserves are drawn upon to settle net differences in current account and capital and financial account balances so that the balance of payments is brought into balance. However, the change in the status of official reserves represents a disequilibrium in the balance of payments. Official reserves are needed to accommodate the difference in these cases.
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To see how variables evolve over time we use
A) a scatter graph. B) an evolution plot. C) a cross-section plot. D) a time-series graph.
Given the information in the table above, if the world equilibrium price of widgets were 4 cloth, then
A) both countries could benefit from trade with each other. B) neither country could benefit from trade with each other. C) each country will want to export the good in which it enjoys comparative advantage. D) neither country will want to export the good in which it enjoys comparative advantage. E) both countries will want to specialize in cloth.