What happens when there is a deficit in the balance of payments?
What happens when there is a deficit in the balance of payments? A balance of payments deficit means the country imports more goods, services, and capital than they export. It must borrow from other countries to pay for its imports. If the deficit continues long enough, the country may have to sell its assets to pay its creditors. Why is a balance of payments deficit bad? A very high balance of payments deficit may, at some point, cause a loss of confidence by foreign investors. This can lead to a decline in living standards and lower confidence for investment. How...