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Select all that are true regarding the balance of payments ( BOP ) : Since the balance of payments is market driven it will be
Select all that are true regarding the balance of payments BOP:
Since the balance of payments is market driven it will be in equilibrium ie equal to zero like all markets.
Relative prices that change due to FX rates create an arbitrage opportunity on all four parts of the BOP that alter the engagement in those four parts and that brings the BOP closer to balance.
The balance of payments is an idea that holds over the long run since it depends on changes in the FX rate that alter supply and demand flows in FX market due to imbalances in supply and demand seen in the BOP accounts.
The balance of payments theory is that the net investment flows and trade flows between two countries currency pair, excluding foreign reserves balance to zero consistently and quickly.
The balance of payments is unlikely to exactly balance since it relies on imperfect arbitrage across international boarders.
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