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What is meant by an unfavourable balance of payment? |
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Answer» Usually, in the accounting sense, the total receipts in the balance of payments account must be equal to the total payments. Thus the balance of payment is always balanced. But this account may or may not be balanced. If total autonomous receipts exceed the total spendings of foreign exchange in a given year, there arises a ‘surplus’ in the transaction account of the balance of payments. On the other hand, if receipts fall short of spending, there occurs a ‘deficit’ in the autonomous account of the balance of payments. In both cases, the balance of payments is out of equilibrium, i.e., there will be an unfavorable balance of payment. |
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