Page 154 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

International Trade and Finance

Notes • Though the credit and debit are written balanced in the balance of payment account, it may not
remain balanced always. Very often, debit exceeds credit or the credit exceeds debit causing an
imbalance in the balance of payment account. Such an imbalance is called the disequilibrium.
Disequilibrium may take place either in the form of deficit or in the form of surplus.
12.4 Key-Words

1. Equilibrium : In economics, economic equilibrium is a state of the world where
economic forces are balanced and in the absence of external
influences the (equilibrium) values of economic variables will not
change. For example, in the standard text-book model of perfect
competition, equilibrium occurs at the point at which quantity
demanded and quantity supplied are equal.
2. Structural Disequilibrium : A situation where internal and/or external forces prevent market
equilibrium from being reached or cause the market to fall out of
balance. This can be a short-term byproduct of a change in variable
factors or a result of long-term structural imbalances.
12.5 Review Questions

1. Write a short note on the equilibrium of balance of payments.
2. What are the types of balance of payment equilibrium ? Discuss.
Answers: Self-Assessment
1. (i)(d) (ii)(c) (iii)(a) (iv)(c) (v)(b)
(vi)(d)
12.6 Further Readings

1. Adapted, with slight modifications, from the definition given in the International
Monetary Fund Balance of Payments Manual, 2nd edn., January 1950, p. 1.
2. Leland B. Yeager, International Monetary Relations (New York : Harper & Row,
1966), p. 36.
3. J.E. Meade, The Theory of International Economic Policy, Vol. I : The Balance of
Payments, (1951) p. 7. See also Yeager, op. cit., p. 452.
4. W.M. Scammel, International Trade and Payments (Toronto : The Macmillan
Company, 1974) p. 272.
5. J.E. Meade, op. cit., p. 11.

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