Question : When does the problem of unfavourable balance of payments arise?
Option 1: Imports > Exports
Option 2: Exports = Imports
Option 3: Inflation decreases
Option 4: No option is correct
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Correct Answer: Imports > Exports
Solution : The correct answer is Imports > Exports
An unfavourable balance of payments problem occurs when a country's imports exceed its exports. This situation can emerge for a variety of reasons and can have economic consequences. Trade imbalances, capital flows, currency rate fluctuations, government policies, and external shocks are all common causes of an unfavourable balance of payments. They also include trade imbalances, in which a country purchases more than it sells, and capital outflows surpass inflows.
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