International reserves allow a country to finance disequilibria in its balance-of-payments position.

Question

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International reserves, such as foreign currency and gold holdings, can be used to finance a country's deficit in its balance-of-payments. This allows the country to continue paying for imports and meeting its international obligations without facing a shortage of foreign exchange. Therefore, international reserves help maintain stability in a country's economy and prevent a financial crisis.

International Reserves Allow a Country to Finance Disequilibria in Its