When a country must make a net payment to foreigners because of a balance-of-payments deficit, the central bank of the country
A)should do nothing.
B)should run down its official reserve assets (e.g. gold, foreign exchanges, and SDRs).
C)should borrow anew from foreign central banks.
D)either b or c will work.

Question

Quizplus · Accepted Answer

When a country has a balance-of-payments deficit, it can either use its official reserve assets to make the payment or borrow from foreign central banks to cover the deficit.

When a Country Must Make a Net Payment to Foreigners