Balance of Payment (BOP): It is an account of what is received by the residents of the country from the rest of world and what these residents have paid out to other countries on the account of the sale of goods, services and other invisible items as well as on the account of capital transfers from other countries. It is divided into two accounts. Current Account: It maintains all the transactions related to the exchange of goods and services and unilateral transfers. It includes shipping insurance and banking services, investment income, foreign travel, transfer payments and balance of trade . Financial Account: It provides details of all the capital transfers such as investment and loans between one country and the rest of the world. Some components are banking capital, official capital, private capital, gold and foreign capital. Relation: In an economy, the sum of both current account and balance account is zero because they are balanced. The relation between them is, Current Account Balance + Financial Account Balance = 0 Balance of Trade (BOT): It is a type of merchandise balance. It refers to the difference between the value of exports and imports. It highlights the visible trade transactions with the rest of the world for a given year. When the value of exports is more than its imports, the BOT is a surplus, but when the value of import is more than its exports, the BOT is a deficit and when both are equal, then it is balanced. The formula to calculate the BOT is, BOT = V X − V M Here, BOT is the balance of trade. V X is the value of exports. V M is the value of imports.

Question

Want to see the full answer?

Answer 1

Question

Definition Definition Difference in value of a country's net exports and net imports for goods and services in a given period. A positive balance of trade is called a surplus and coincides with more net cash inflows into a country; a negative balance of trade deficit is a deficit and results in net cash outflows. A balance of trade surplus or deficit doesn't necessarily indicate a positive or negative situation for a country.

Chapter 18, Problem 3P

To determine

Concept Introduction:

Balance of Payment (BOP): It is an account of what is received by the residents of the country from the rest of world and what these residents have paid out to other countries on the account of the sale of goods, services and other invisible items as well as on the account of capital transfers from other countries. It is divided into two accounts.

Current Account: It maintains all the transactions related to the exchange of goods and services and unilateral transfers. It includes shipping insurance and banking services, investment income, foreign travel, transfer payments and balance of trade.

Financial Account: It provides details of all the capital transfers such as investment and loans between one country and the rest of the world. Some components are banking capital, official capital, private capital, gold and foreign capital.

Relation: In an economy, the sum of both current account and balance account is zero because they are balanced.

The relation between them is,
Current Account Balance+ Financial Account Balance=0

Balance of Trade (BOT): It is a type of merchandise balance. It refers to the difference between the value of exports and imports. It highlights the visible trade transactions with the rest of the world for a given year. When the value of exports is more than its imports, the BOT is a surplus, but when the value of import is more than its exports, the BOT is a deficit and when both are equal, then it is balanced.

The formula to calculate the BOT is,
BOT=VX−VM

Here,

BOT is the balance of trade.

V_Xis the value of exports.

V_M is the value of imports.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

5. We learnt the following equation in the class: Ak = sy - (n + 8)k where y = ko. Now, I transform this equation into: Ak/k = sy/k - (n + 8). I want you to use a diagram to show the steady state solution of this equation (In the diagram, there will be two curves - one represents sy/k and one represents (n + 8). In the steady state, of course, Ak/k = 0). In this diagram, the x-axis is k. What will happen to this diagram if the value of n increases?

Not use ai please

3. A country has the following production function: Y = K0.2L0.6p0.2 where Y is total output, K is capital stock, L is population size and P is land size. The depreciation rate (8) is 0.05. The population growth rate (n) is 0. We define: y = ½, k = 1 and p = . Land size is fixed. L a) Find out the steady state values of k and y in terms of p, the per capita land size.

Answer 2

Question

Definition Definition Difference in value of a country's net exports and net imports for goods and services in a given period. A positive balance of trade is called a surplus and coincides with more net cash inflows into a country; a negative balance of trade deficit is a deficit and results in net cash outflows. A balance of trade surplus or deficit doesn't necessarily indicate a positive or negative situation for a country.

Chapter 18, Problem 3P

To determine

Concept Introduction:

Balance of Payment (BOP): It is an account of what is received by the residents of the country from the rest of world and what these residents have paid out to other countries on the account of the sale of goods, services and other invisible items as well as on the account of capital transfers from other countries. It is divided into two accounts.

Current Account: It maintains all the transactions related to the exchange of goods and services and unilateral transfers. It includes shipping insurance and banking services, investment income, foreign travel, transfer payments and balance of trade.

Financial Account: It provides details of all the capital transfers such as investment and loans between one country and the rest of the world. Some components are banking capital, official capital, private capital, gold and foreign capital.

Relation: In an economy, the sum of both current account and balance account is zero because they are balanced.

The relation between them is,
Current Account Balance+ Financial Account Balance=0

Balance of Trade (BOT): It is a type of merchandise balance. It refers to the difference between the value of exports and imports. It highlights the visible trade transactions with the rest of the world for a given year. When the value of exports is more than its imports, the BOT is a surplus, but when the value of import is more than its exports, the BOT is a deficit and when both are equal, then it is balanced.

The formula to calculate the BOT is,
BOT=VX−VM

Here,

BOT is the balance of trade.

V_Xis the value of exports.

V_M is the value of imports.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Difference in value of a country's net exports and net imports for goods and services in a given period. A positive balance of trade is called a surplus and coincides with more net cash inflows into a country; a negative balance of trade deficit is a deficit and results in net cash outflows. A balance of trade surplus or deficit doesn't necessarily indicate a positive or negative situation for a country.

Chapter 18, Problem 3P

To determine

Concept Introduction:

Balance of Payment (BOP): It is an account of what is received by the residents of the country from the rest of world and what these residents have paid out to other countries on the account of the sale of goods, services and other invisible items as well as on the account of capital transfers from other countries. It is divided into two accounts.

Current Account: It maintains all the transactions related to the exchange of goods and services and unilateral transfers. It includes shipping insurance and banking services, investment income, foreign travel, transfer payments and balance of trade.

Financial Account: It provides details of all the capital transfers such as investment and loans between one country and the rest of the world. Some components are banking capital, official capital, private capital, gold and foreign capital.

Relation: In an economy, the sum of both current account and balance account is zero because they are balanced.

The relation between them is,
Current Account Balance+ Financial Account Balance=0

Balance of Trade (BOT): It is a type of merchandise balance. It refers to the difference between the value of exports and imports. It highlights the visible trade transactions with the rest of the world for a given year. When the value of exports is more than its imports, the BOT is a surplus, but when the value of import is more than its exports, the BOT is a deficit and when both are equal, then it is balanced.

The formula to calculate the BOT is,
BOT=VX−VM

Here,

BOT is the balance of trade.

V_Xis the value of exports.

V_M is the value of imports.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Difference in value of a country's net exports and net imports for goods and services in a given period. A positive balance of trade is called a surplus and coincides with more net cash inflows into a country; a negative balance of trade deficit is a deficit and results in net cash outflows. A balance of trade surplus or deficit doesn't necessarily indicate a positive or negative situation for a country.

Chapter 18, Problem 3P

To determine