A balance of payments deficit will always occur if:
A) both the current and capital accounts are positive.
B) the official transaction account is negative.
C) the current account is negative.
D) the current and capital (excluding official reserve transactions) are negative.

Question

Quizplus · Accepted Answer

A balance of payments deficit occurs when the sum of the current account and the capital account (excluding official reserve transactions) is negative. This means the country is spending more on foreign trade than it is earning, and is borrowing capital from foreign sources to make up the deficit. Options A, B, and C do not necessarily result in a balance of payments deficit.

A Balance of Payments Deficit Will Always Occur If