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Can a nation have a favorable balance of trade and an unfavorable balance of payments

Can a nation have a favorable balance of trade and an unfavorable balance of payments

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Answer #1

It depends on how diversified the trad of the nation is. The favorable trade balance is having an export greater than the imports and balance of payment just shows the inflow and outflow of funds in the nation.

IF there are only two nations and they are trading with each other this situation is impossible. But if a nation is trading with more than two nations it can have a favorable trade with one nation and unfavorable balance of payment.

For example, India has a favorable trade with the US and unfavorable with the balance of payment overall because of huge crude imports. If there were only two nations, the US and India, have a favorable balance of trade and unfavorable balance of payment is impossible.

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