The Balance of Payment account is important, however, there are some aspects of the account which is more important than others. What are these aspects?
The Balance of Payment account is important, however, there are some aspects of the account which is more important than others.
What are these aspects?
The balance of trade is an important part of a country's balance of payments. The difference between how much a country imports and how much it exports is known as the trade balance. A deficit occurs when a country buys more products and capital than it exports. When a country runs a deficit, it borrows money to fund its consumption costs rather than investing in prospects for economic growth. A country with a large enough deficit may be forced to sell assets such as commodities, land, and natural resources to repay its debt. A surplus, on the other hand, occurs when a country exports more commodities or capital than it imports. This equilibrium produces enough national capital to support domestic production and expansion. Countries with large surpluses could be able to lend to countries with deficits.
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