Balance of Payment (BoP) – Causes of Disequilibrium and Measures to Rectify

Causes of Disequilibrium in the BoP

  • Cyclical fluctuations
  • Short fall in the exports
  • Economic Development
  • Rapid increase in population
  • Structural Changes
  • Natural Calamites
  • International Capital Movements

Measures to Correct Disequilibrium in the BoP

Monetary Measures

  • Monetary Policy: The monetary policy is concerned with money supply and credit in the economy. The Central Bank may expand or contract the money supply in the economy through appropriate measures which will affect the prices.
  • Fiscal Policy: Fiscal policy is government's policy on income and expenditure. Government incurs development and non - development expenditure,. It gets income through taxation and non - tax sources. Depending upon the situation ....
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