Balance of Payment (BOP): It is an account of what is received by residents of the country from the rest of the world and what these residents have paid out to other countries on account of sale of goods, services and other invisible items as well as on account of capital transfers from the 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 and gold and foreign capital. Relation Between Current Account and Financial Account: In an economy, sum of both current account and balance account is zero because they are balanced. The relation between them is: Balance of Trade (BOT): It is a type of merchandise balance. It refers to the difference between value of export and import. It highlights visible trade transaction with the rest of the world for a given year. When the value of export is more than import, the BOT is surplus, when value of import is more than export BOT is deficit and when both are equal then it is balanced. The formula to calculate BOT is: Here, BOT is balance of trade. V X is value of export. V M is the value of import.

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Answer 1

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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 33, Problem 3P

To determine

Balance of Payment (BOP):

It is an account of what is received by residents of the country from the rest of the world and what these residents have paid out to other countries on account of sale of goods, services and other invisible items as well as on account of capital transfers from the 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 and gold and foreign capital.

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

The relation between them is:

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

Here,

BOT is balance of trade.

V_Xis value of export.

V_Mis the value of import.

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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 33, Problem 3P

To determine

Balance of Payment (BOP):

It is an account of what is received by residents of the country from the rest of the world and what these residents have paid out to other countries on account of sale of goods, services and other invisible items as well as on account of capital transfers from the 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 and gold and foreign capital.

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

The relation between them is:

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

Here,

BOT is balance of trade.

V_Xis value of export.

V_Mis the value of import.

Expert Solution & Answer

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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 33, Problem 3P

To determine

Balance of Payment (BOP):

It is an account of what is received by residents of the country from the rest of the world and what these residents have paid out to other countries on account of sale of goods, services and other invisible items as well as on account of capital transfers from the 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 and gold and foreign capital.

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

The relation between them is:

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

Here,

BOT is balance of trade.

V_Xis value of export.

V_Mis the value of import.

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 33, Problem 3P

To determine