How does the balance of payments reflect supply, demand status of foreign exchange for a country?

● The balance of the payment is the record of statements of the economic transactions of the country with the rest of the world.

● It is a representation of the inflow of foreign exchange into the country and the outflow of foreign exchange from the country.

● It reflects the demand and supply of foreign exchange through the current account and capital account.

● If there is a deficit in the current account, it implies that the export of the goods and services are less than the imports of goods and services.

● The exports of goods and services reflect the supply of foreign exchange.

● The imports of goods and services reflect the demand for foreign exchange.

● This implies that the demand for foreign exchange exceeds the supply for it.