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Question
Answer the following question in about 30 words.
Why is it detrimental for a nation to have a negative balance of payments?
Very Short Answer
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Solution
A negative balance of payments indicates that a country’s expenditure on imports exceeds its income from exports. This implies that a country is running down its foreign exchange reserves and has to rely on international loans to finance import payments.
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History of International Trade
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Chapter 8: International Trade - Exercises [Page 76]
