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
Discuss two factors that would increase demand for labortion..

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Evaluating  the Gains and Losses from the Policies of Government:  Consumer and Producer Surplus * Review - Consumer surplus is total benefit or value which consumers rece

Interest: A lender charges interest as the price of lending money (or some other asset) to a borrower. Interest is mainly charged as a specified percentage of the loan's value, per

Policies of Educational Financing - Earmarking Earmarking refers to setting aside and using the funds generated by a special cess/tax for the particular purpose for which it i

Explain three major barriers to development experienced by developing countries. Well, the scope of possible answers here is, em, wide, to say the least. The issue is not to si

Joe Brown’s dairy operates in a perfectly competitive marketplace. Joe’s machinery costs $500 per day and is the only fixed input. His variable costs are comprised of the wages pai

measures to control business cycle


Law of mass action states that at a constant temperature rate of a chemical reaction is directly proportional to product of active masses of the reactants raised to the power equal