Question 4 Answer

a) Balance of Payment deficit refers to imbalances in the current account where a country’s expenditure on foreign goods and services exceeds its receipts from the sale of goods and services to foreigners.

b) Two causes of balance of payment deficit include:

(i) Over-consumption of foreign goods and services because the demand for raw material needed for local production or even by consumers.

(ii) Prices of imports are higher than those of exports so we find that the expenditure on imports will be greater than those on exports.

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