The overall balance of payments must always balance. If this is the case, why might a deficit on one part of the balance of payments is seen as a problem?
Answer to relevant QuestionsList some factors that could cause an increase in the credit items of the balance of payments and a decrease in the debit items. What would be the effect on the exchange rate (assuming that it is freely floating)? What ...In what way may short-term demand-management policies help to stabilise the economy? What problems occur in the use of such policies?How can the interaction of the multiplier and the accelerator explain cyclical fluctuations in national income?If the government reduces the size of its public-sector net cash requirement, why might the money supply nevertheless increase more rapidly?Under what circumstances will (a) A rise in investment and (b) A rise in money supply cause a large rise in national income?
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