Current account - balance of payments, Microeconomics

Current Account:

The Current Account can be broken down into two parts, viz., one, balance of trade, and, two, balance on invisibles. The Balance of Trade (BOT) deals only with exports and imports of merchandise (or visible items). The Balance on Invisibles (BOI) shows net receipts on account of invisibles. These include the remittances, net service payments, etc. It is not necessary that the BOT should always balance; more often than not, it will show either a surplus or a deficit. Similarly, the BOI will always show either a surplus or a deficit. A surplus on BOT may be matched with a surplus or deficit on BOI. If the surplus on BOI equals the deficit on BOT, the current account will show a net balance. But then there is no reason why these two balances should always be equal, again, always in opposite directions. As a matter of fact, the balance on current account can always show a deficit or a surplus. A surplus on current account leads to an acquisition of assets or repayment of debts previously contracted, and a deficit involves withdrawal of previously accumulated assets or is met by borrowings.   

Posted Date: 11/15/2012 12:20:51 AM | Location : United States







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

Write discussion on Current account - balance of payments
Your posts are moderated
Related Questions
What is significance of methodological economics...

1) Lynne's income is £2, 000 and she is risk averse. The probability of someone slipping on her stairs is 1/8. If this happens, she will be sued for £1, 000 and will have to pay th

Sir/Ma''am i have to make a project of 4-5 page on Investigating the buying behavior of individuals in the white goods sector and seeing if there exists any negative relationship b

Suppose that there is a credit market imperfection because of limited commitment. As in the setup with collateralized wealth, each consumer has a component of wealth which has valu

ref article :http://www.economist.com/news/finance-and-economics/21587795-if-congress-fails-lift-limit-americas-debts-consequences-are   a.assume that the debt ceiling crisis

Advantages of Division of labour: Division of labour has advantages including the following: Development of Greater Skill by the Worker In division of labour, each

The market demand function of a firm is given by 4P + Q - 16 = 0 And the AC function takes the form AC = 4/Q + 2 - 0.3Q + 0.05Q 2 Find the Q which gives: (a)  Maxim

Perceived Value Pricing This refers to a pricing strategy that dictates that the price of a given item will be set based on the customer's perception of the value of that item


Maurice has the following utility function: U (X; Y ) = 20X + 80Y ?? X2 ?? 2Y 2 where X is his consumption of CDs, with a price of $1, and Y is his consumption of movie videos, wit