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

Explain and evaluate the impact of legislation on the U.S. criminal justice system, specifically on the prison population and its impact on poverty and the U.S. economy. Include significant elements and limitations such as the War on Drugs and the First Step Act.

Given the following petroleum tax details, calculate the marginal tax rate and explain its significance: Total Revenue: $500 million Cost of Operations: $200 million Tax Rate: 40% Additional Royalty: 5% Profit-Based Tax: 10%

Use a game tree to illustrate why an aircraft manufacturer may price below the current marginal cost in the short run if it has a steep learning curve. (Hint: Show that learning by doing lowers its cost in the second period.) Part 2 Assume for simplicity the game tree is illustrated in the figure to the right. Pricing below marginal cost reduces profits but gives the incumbent a cost advantage over potential rivals. What is the subgame perfect Nash equilibrium?

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