How does disequilibrium occur in the balance of payments? Describe the methods of correcting the disequilibrium with examples.
A balance of payments disequilibrium can occur when there is an imbalance between domestic savings and domestic investments. A deficit in the current account balance will result if domestic investments is higher than domestic savings since the excess investments will be financed with capital from foreign sources. In addition, when the trade agreement between two countries affects the level of import or export activities, _________ __________ ____ _____ _____ _______ _________ _________.
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