Answer (C) is correct . The balance of payments is defined as the excess of imports, private capital outflows, grants, and remittances over exports and private capital inflows. When there is a surplus in the balance of payments, more domestic goods may have been sold abroad than were imported, and/or foreigners may have invested more capital in the domestic country than domestic citizens invested abroad. For this reason, a surplus is considered a favorable balance of payments. Just the opposite is true for a deficit in the balance of payments.
Answer (A) is incorrect because Exports and imports of goods affect only the balance of trade, not the more comprehensive balance of payments.
Answer (B) is incorrect because Exports and imports of goods affect only the balance of trade, not the more comprehensive balance of payments.
Answer (D) is incorrect because Exports and imports of goods affect only the balance of trade, not the more comprehensive balance of payments.
|
