Q.Distinguish between a deficit Balance of Payments and a surplus Balance of Payments.

The direction of the imbalance — whether the country is paying out more or receiving more — decides whether it is called a deficit or a surplus BOP. …

A deficit Balance of Payments arises when a country's total payments (for imports, invisible outflows, loan repayments, capital outflows) to the rest of the world exceed its total receipts (from exports, invisible inflows, loans and investment received) over the period. This is usually financed by drawing down official foreign-exchange reserves or by fresh external borrowing.

A surplus Balance of Payments arises when total receipts exceed total payments — the country earns/receives more from the rest of the world than it pays out, which typically adds to its foreign-exchange reserves. …

Confusing 'deficit' with 'unfavourable Balance of Trade' — a country can have a Current Account deficit but an overall BOP surplus if capital inflows ar …