Explain how a country can run an overall balance of payments, Financial Management

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Explain how a country can run an overall balance of payments deficit or surplus.

Answer: A country can run a whole BOP (balance of payments) deficit or surplus by engaging in the official reserve transactions. For instance, an overall BOP (balance of payments) deficit can be supported by drawing down the central bank’s reserve holdings. Similarly, an overall BOP surplus can be absorbed by adding to the central bank’s reserve holdings.

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