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Which of the following is/are likely to be associated with the "Positive Reserve Changes" in the Balance of Payments (BoP)?
Deficit in the Balance of Payments
  • Increase in the forex reserves
    Select the correct answer using the code given below:
    • a)
      1 only
    • b)
      2 only
    • c)
      Both 1 and 2
    • d)
      Neither 1 nor 2
    Correct answer is option 'A'. Can you explain this answer?
    Most Upvoted Answer
    Which of the following is/are likely to be associated with the "Posit...
    Deficit in the Balance of Payments
    - A deficit in the Balance of Payments occurs when a country's imports exceed its exports, leading to a negative balance.
    - This indicates that the country is spending more foreign currency than it is earning, resulting in a decrease in forex reserves.
    Increase in the forex reserves
    - Positive Reserve Changes in the Balance of Payments are often associated with an increase in forex reserves.
    - When a country experiences an increase in its forex reserves, it indicates that it is earning more foreign currency than it is spending.
    - This can be due to factors such as an increase in exports, foreign investments, or remittances from abroad.
    Conclusion
    - Therefore, in the context of the Balance of Payments, Positive Reserve Changes are likely to be associated with an increase in forex reserves rather than a deficit in the Balance of Payments.
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    Community Answer
    Which of the following is/are likely to be associated with the "Posit...
    • If the autonomous payments in the Balance of Payments (BoP) are higher than the autonomous receipts, then the outflow would be higher than the inflows and hence, the BoP would be in deficit.
    • Similarly, the deficit in the BoP is accompanied by a decrease in the forex reserves.
    • The deficit in the BoP would mean that the reserve changes would be denoted as "Positive".
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    Which of the following is/are likely to be associated with the "Positive Reserve Changes" in the Balance of Payments (BoP)? Deficit in the Balance of Payments Increase in the forex reserves Select the correct answer using the code given below:a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
    Question Description
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