Evidence of a chronic balance of payments deficit is:
A) a decline in amount of the nation's currency held by other nations.
B) an excess of exports over imports.
C) diminishing reserves of foreign currencies.
D) an increase in the international value of the nation's currency.

Question

Quizplus · Accepted Answer

Diminishing reserves of foreign currencies indicate that the nation is consistently importing more than it is exporting, resulting in a chronic balance of payments deficit. Answer A is incorrect because a decline in the amount of the nation's currency held by other nations can indicate a variety of factors, such as changes in foreign investment, and may not necessarily indicate a balance of payments deficit. Answer B is incorrect because an excess of exports over imports would indicate a surplus in the balance of payments, not a deficit. Answer D is incorrect because an increase in the international value of the nation's currency may occur for various reasons and may not necessarily indicate a balance of payments deficit.

Evidence of a Chronic Balance of Payments Deficit Is