Balance of payments, Business Economics

BALANCE OF PAYMENTS:

The record of all transactions (trade and financial) of the residents of one country with the rest of the world is Balance of Payments (BoP). The direction of money flows determines whether a particular transaction is a Credit or Debit item.  For example, exports of goods is a credit item as money flows into the economy.  Similarly, import of goods is a debit item as money flows out of the country.  Investment abroad (i.e., export of saving) is a debit item as the transaction results in out flow of money while foreign investment in a country is a credit item.

The BoP has two accounts: Current and Capital accounts. All current/revenue expenditure transactions (such as exports and imports of goods, transfer payments, non-factor payments, etc.) are recorded in current account.  The current account balance reflects whether there is a surplus (+) or deficit (-) in this account. All transactions, (export and import) that influence country's capital assets are recorded in capital account.  For example, if a country borrows capital from foreign sector, it would be recorded as credit item and if the country lends capital to the foreign sector, it would be recorded as debit item in capital account. The net surplus (+) or deficit (-) in capital account is recorded in capital account balance. The components of current and

capital accounts are presented in table 1  

720_BALANCE OF PAYMENTS.png

Posted Date: 10/23/2012 7:27:21 AM | Location : United States







Related Discussions:- Balance of payments, Assignment Help, Ask Question on Balance of payments, Get Answer, Expert's Help, Balance of payments Discussions

Write discussion on Balance of payments
Your posts are moderated
Related Questions
discuss the concept of demand for the products that are being consumed by the different consumers

What are the limitations of balanced growth? The limitations of balanced growth: • The strategy of balanced growth is away from the resources of most poor countries; • Go

FOUR CAUSES OF SLOW OF SOUTH AFRICA ECONOMY

Question 1: (a) There are few, if any, real companies with negative betas. But suppose you found one with β= -0.25. How would you expect this stock's rate of return to chang

What is suitable technology? Technology is suitable when this employs methods which make the best use of accessible resources that is labour-intensive, straightforward techniqu

Question: (a) State whether the following statements are TRUE or FALSE. Justify briefly your answer. (i) Money is the most liquid medium to store value. (ii) An increa

price elasticity of demand for luxury goods in india

1. Three clients of Disrup, Ltd P, Q and R are direct competitors in the retail business. In the first week of the year P had 300 customers Q had 250 customers and R had 200 custom

QUESTION (a) Compare and contrast the two major transmission channels that characterizes the credit view. (b) Discuss which asset price channel of transmission of monetary p

Foundations in Business and Commerce 1. What is logistics networking? 2. Write a short note on ethics in retailing. 3. What is the concept of insurance? 4. Describ