# Step 1: Calculate the Overall Balance of Payments The **overall balance of payments (BoP)** is the sum of the **current account** and **capital account** balances. - Current account deficit = \( -\$40{,}000 \) - Capital account surplus = \( +\$55{,}000 \) \[ \text{Overall BoP} = (\text{Current Account}) + (\text{Capital Account}) = -\$40{,}000 + \$55{,}000 = \$15{,}000 \] **Explanation:** We add the deficit (negative number) to the surplus (positive number). The result is a positive overall BoP of $15,000. --- # Step 2: Find the Change in Foreign Exchange Reserves If the overall balance of payments is **positive**, it means there is a **net inflow** of foreign currency, so the country's foreign exchange reserves **increase** by that amount. \[ \text{Change in Foreign Exchange Reserves} = +\$15{,}000 \] **Explanation:** A positive BoP means the central bank's reserves will rise by the overall surplus. --- # Final Answer - **Overall balance of payments:** $15,000 (surplus) - **Change in foreign exchange reserves:** $15,000 increase

# Step 1: Calculate the Overall Balance of Payments The **overall balance of payments (BoP)** is calculated by summing the **current account** and **capital account** balances. - Current account deficit = \( -\$40{,}000 \) - Capital account surplus = \( +\$55{,}000 \) \[ \text{Overall BoP} = (\text{Current Account}) + (\text{Capital Account}) = -\$40{,}000 + \$55{,}000 = \$15{,}000 \] **Explanation:** In this step, we combine the current account deficit (which is a negative value) with the capital account surplus (a positive value). The result is a positive overall BoP of $15,000, indicating a net inflow of funds. --- # Step 2: Find the Change in Foreign Exchange Reserves A positive overall balance of payments indicates a **net inflow** of foreign currency, leading to an increase in the country's foreign exchange reserves. \[ \text{Change in Foreign Exchange Reserves} = +\$15{,}000 \] **Explanation:** Since the overall BoP is positive, it implies that the country has received more foreign currency than it has spent, resulting in an increase of $15,000 in foreign exchange reserves. --- # Final Answer - **Overall balance of payments:** $15,000 (surplus) - **Change in foreign exchange reserves:** $15,000 increase