The balance of payments is a statistical record of all the economic transaction between residents of...Which of the following statements is tree A. Deficits may lead government to reduce interest

A key definition that needs to be resolved at the outset is that of a domestic and foreign resident. It is important to note that citizenship and residency are not necessarily the same thing from the viewpoint of the balance of payments statistics. The term residents comprises individuals, households, firms and the public authorities. There are some problems that arise with respect to the definition of a resident. Multinational corporations are by definition resident in more than one country. For the purposes of balance - of - payments reporting the subsidiaries of a multinational are treated as being a resident in the country in which they are located even if their shares are actually owned by domestic residents. Another problem concerns the treatment of international organizations such as the International Monetary Fund, the World Bank, United Nations and so forth. These institutions are treated as being foreign residents even though they may actually be located in the reporting country. For example although the International Monetary Fund is located in Washington, contributions by the US government to the Fund are included in the US balance -of-payments statistics because they are regarded as transactions with a foreign resident. Tourists are regarded as being foreign residents if they stay in the reporting country for less than a year.

The criterion for a transaction to be included in the balance of payments is that it must involve a transaction between a resident of the reporting country and a resident from the rest of the world. Purchases and sales between residents from the same country are excluded.