Balance of Payment Deficit and Balance of Payment Surplus

len Alfred Ajibola - Wed, 18th December, 2019 @ 13:42: PM

Topics in Commerce

Principle of Marketing: Positioning as a Marketing Mix Principle of Marketing: Packaging as a Marketing Mix Elements of Promotion in Marketing Mix Principle of Marketing: Promotion as a Marketing Mix Principle of Marketing: Place as a Marketing Mix Principle of Marketing: Price as a Marketing Mix Principles of Marketing: The 7 Ps of Marketing Mix Factors necessary for Division of Labour Disadvantages of Division of Labour Advantages of Division of Labour Outbound Marketing explained Inbound Marketing explained Production - Types of Production Commerce: Definitions and Scopes of Commerce Differences between Balance of Trade and Balance of Payments Balance of Payment Deficit and Balance of Payment Surplus Disadvantages of Foreign Trade Divisions of Foreign Trade Advantages of Foreign Trade What is Foreign Trade? Types of Foreign Trade

Academic Questions in Commerce

Please check out our Test Your Knowledge page to see all Questions and Answers

The followings are principles of marketing mix except _____.

  • A. People

  • B. Positioning

  • C. Pressure group

  • D. Packaging

  • E. Promotion

  • F. Product

The followings are advantages of division of labour EXCEPT _____.

  • A. It promotes the use of machines in production industries
  • B. There is an increase in profit
  • C. It saves time and expenses of training
  • D. It fosters the spirit of division
  • E. It increases the production of quality goods and services in the market
  • F. It increases a country's economic growth

Which of the following statement is incorrect concerning division of labour?

  • A. It is the specialization of works
  • B. It can become monotonous
  • C. It is the specialization of processes
  • D. The nature of a job is not a condition for division of labour
  • E. A person performs only a part of the job
  • F. Division of labour has some of its drawbacks

What does a bearer cheque mean?

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Balance of Payments Deficit:

Balance of Payments Deficit implies that a country imports more goods, services and capital compared to its exports. As a result, such countries will have to borrow from other countries, IMF (International Monetary Fund) or World Bank to pay for its imports.

Please read on Balance of Payments and Balance of Trade here.

A continual balance of payment deficit will make a country end up as a consumer nation. With time, such countries will become debtors to other countries or international banks.

Note: A continual balance of payment deficit is not the ideal way to go for any country since their creditors may eventually seize their assets; and such asset could be the country’s natural resources.

Please read on Business Studies, it's Scope and Importance here.

Balance of Payment Deficit is also called Unfavorable Balance of Payments or Deficit Balance of Payments.

Solutions to Balance of Payment Deficit

  1. The country should implement the control of foreign exchange transaction.
  2. The country should devaluate its domestic currency.
  3. The country should establish industries that will produce similar goods which will act as substitutes for imported goods.
    Please read on Production here.
  4. The country should impose high tariffs on importation of goods and services. (They may even ban the importation of certain goods).
    Please read on the Disadvantages of Foreign Trade here.
  5. They country can borrow from financial institutions like World Bank and IMF to support its domestic production.


Balance of Payments Surplus

Balance of Payment Surplus implies that the country exports more goods, services and capital when compared to its imports.

This is the ideal way to go because such country will have enough capital to support its local or domestic production; simultaneously increasing job opportunities within it.

Please read on the Advantages of Foreign Trade here.

In a country with a "balance of payment surplus", the citizens are gainfully employed; and these countries are generally lenders to other nations.

Balance of Payments Surplus is also called Favorable Balance of Payments or Surplus Balance of Payments.

Please read on the Differences between Balance of Trade and Balance of Payments here.

Below are some important points to note with regards to Balance of Payments:

  1. Balance of Payments for Current Account: It comprises of the receipts and payments for services. The services could be visible or invisible.
  2. Balance of Payments for Capital Account: It is the capital that comes into and goes out of a country. It is simply capital inflow and outflow and can both be short term and long term.
    Capital movement in the form of investments and loans are all included here.
  3. Balance of Payments for Monetary Movement Account: It shows how the balances of both the current and capital accounts are settled.
    Please read on Methods of Payments through Commercial Banks here.

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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.

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Amazing facts in Commerce

Amazon is an e-commerce website launched in 1995. It did not make any profit for its first seven years.

Amazon's first profit was in 2003. Its founder 'Jeff Bezos' is the richest man in the world as at 2018/2019


Commerce can be defined as the exchange of goods and services, usually for money and on a large scale that will require the transportation of such goods and services.

Commerce is crucial (important) to the life of any Nation for the following reasons:

  1. Commerce facilitates the exchange of goods and services which everyone can enjoy, regardless their location or whether the goods is produced within or outside their country.
  2. Commerce creates an awareness of the existence of goods and services through advertising.
  3. Commerce offers employment to a very large number of people in a Nation.
  4. Commerce promotes rapid transfer of both oral and written messages through communication.
  5. Commerce determines the standard of living in a Nation. This is because the extent of commercial activities is crucial to wealth of  a nation.
  6. Commerce makes for the protection against risk in day to day business operations.
  7. Through commerce, there is a steady supply of goods in a Nation. This is because commerce ensures that goods produced are stored until needed.

Please read on the functions and characteristics of commerce here

A public company is not owned by an individual; rather it's usually owned by groups or a large number of people.

The shares of a public company are traded freely on the stock exchange.

Below are some features of a public company:

  1. A public company must receive it’s training certificate to commence business.
  2. The minimum membership is two while the maximum membership is limitless.
  3. A public company has a legal status. It can sue and be sued.
  4. A public company files and publishes its annual reports, including its accounts.
  5. The liability of its members is limited.
  6. The shares are easily transferrable through the stock market.
  7. A public company can issue debentures to be secured as its assets.

Please read on Limited Liability Company, Its Advantages and Disadvantages here

There are seven elements of the marketing mix. These are:

  1. Product: Anything thing that satisfies a consumer’s need is referred to as a product. Product may come in the form of manufactured goods, raw materials or services.
  2. Price: Price is defined as the exchange value of goods and services supplied. In simple terms, it serves as a mechanism of exchange.
  3. Promotion: It involves all the processes that concerns with how business organizations should inform their customers about its product. If done properly, the demand of product will be increased. Promotions can take the form of advertising, search engine optimization, social media marketing, trade fairs exhibition and so on.
  4. Place: The place as a marketing mix concerns variables such as location and transport facility where the distribution of goods and services take place.
  5. Packaging
  6. Positioning
  7. People

Think of marketing mix as the set of marketing tools that an industry or company uses to drive or accomplish its marketing objectives in the target market

Please read on the Principles of Marketing Mix here