Consider the following statements about the balance of payments 1 ...........

Economic Affairs Balance of Payments

Consider the following statements about the balance of payments

1. The decrease in official reserves is called the overall balance of payments surplus.

2. The balance of payments deficit or surplus is obtained after adding the current and capital account balances.

3. A country is said to be in balance of payments equilibrium when the sum of its current account and its non-reserve capital account equals zero.

Which of the statements given above is/are correct?

1 and 2 only

3 only

1, 2 and 3

2 and 3 only

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Explanation:

The country could engage in official reserve transactions, running down its reserves of foreign exchange, in the case of a deficit by selling foreign currency in the foreign exchange market. The decrease (increase) in official reserves is called the overall balance of payments deficit(surplus). The basic premise is that the monetary authorities are the ultimate financiers of any deficit in the balance of payments (or the recipients of any surplus).

The balance of payments deficit or surplus is obtained after adding the current and capita account balances along with any errors or omissions
A country is said to be in balance of payments equilibrium when the sum of its current account and its non-reserve capital account equals zero, so that the current account balance is financed entirely by international lending without reserve movements.