Assertion (A): A country cannot run a BoP deficit forever.
Reason (R): A BoP deficit is met by running down foreign exchange reserves, which are limited.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Once reserves run low, the country must cut imports, borrow officially or let its currency fall. R explains A.

Concept: Limits to deficits
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsAutonomous and accommodating; BoP deficit

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Ten questions from Balance of Payments, at your own pace.

Assertion (A): A country cannot run a BoP deficit forever.Reason (R): A BoP deficit is met by running down foreign exchange reserves, which are limited.

Explanation

Assertion (A): A country cannot run a BoP deficit forever.
Reason (R): A BoP deficit is met by running down foreign exchange reserves, which are limited.