Econ F.7

The balance of payment is a balance sheet showing a country's international transaction including receipt and payment.

It is divided into "current account" and "capital and financal account"

In accounting, both credit and debit side should be balanced.

However, economically, balance of payment means the amount of international payment is greater than the recepit, resulting in deficit.

If there is balance of payment deficit, there would be capital outflow, leading to a decrease in official reserve.

Balance of payment deficit is a situation where the quantity demanded for foreign currencies exceeds the quantity supplied of foreign currencies at a going exchange rate. That means the payment for international transactions of a country exceeds the receipts from international transactions of it.