The balance of payments is merely a way of listing receipts and payments in international transactions for a country. Policies can be formed with the objectives to induce or curb foreign inflows or outflows.Businesses use BOP to analyze the market potential of a country, especially in the short term. Invisible: Services represent the second category of the current account.

Trade-in services comprise factor income and non-factor income transactions or undertakings. Components of balance of payments are: 1. ANSWER: (i) Current Account. Q.1-WHAT DOES BALANCE OF PAYMENT ACCOUNT OF A COUNTRY RECORD? They could be provided by the government or by private residents living abroad.Capital Account records all international undertakings of assets. The Current account records all transactions involving goods, services, The BOP comprises of two accounts: Current and Capital.The four major components of the Current account are as follows:The Capital account is used to finance the deficit in the current account or absorb the surplus in the current account. The BOP data is affected by vital macroeconomic variables such as exchange rate, price levels, interest rates, employment, and GDP.Monetary and fiscal policies are formed in a way to achieve very specific objectives, which generally exert a significant impact on the balance of payments. There are three components of balance of payment viz current account, capital account, and financial account. (ii) Capital Account. By studying its BOP statement and its components closely, one would be able to identify trends that may be beneficial or harmful to the economy of the county and thus, then take appropriate measures. Purchasing power is measured by the price of a specified basket of goods and services. Investment managers, government policymakers, the central bank, businessmen, etc., all make use of the BOP data to make important decisions. To know more, stay tuned to BYJU’S. Components of BOP. Enroll today!CFI's Investing for Beginners guide will teach you the basics of investing and how to get started. The law of supply depicts the producer’s behavior when the price of a good rises or falls.Join 350,600+ students who work for companies like Amazon, J.P. Morgan, and Ferrari If there is a large trade deficit, the government may adopt a policy of trade restrictions, such as quotas or tariffs. Components of Balance of Payments: Current Account: The current account is a country’s trade balance plus net income and direct payments. An asset is any one of the types in which wealth can be held, for instance: stocks, bonds, Government debt, money, etc., Purchase of assets is a debit on the capital account.
The Balance of Payments is a statement that contains the transactions made by residents of a particular country with the rest of the world over a specific time period. The issuing company creates these instruments for the express purpose of raising funds to further finance business activities and expansion.Forex trading allows users to capitalize on appreciation and depreciation of different currencies. Learn about different strategies and techniques for trading, and about the different financial markets that you can invest in.Marketable securities are unrestricted short-term financial instruments that are issued either for equity securities or for debt securities of a publicly listed company. Hi students in this lecture we will learn about BOP components such as Current Account, Capital Account & Reserve Account and difference between Current Account, Capital Account. If an Indian purchases a UK Car Company, it enters capital account undertakings as a debit (as foreign exchange is going out of India). It is also known as the balance of international payments and if often abbreviated as BOP. The Balance of Payments is a statement that contains the transactions made by residents of a particular country with the rest of the world over a specific time period. The balance of payments is a comprehensive and systematic record of all economic transactions, between the residents of a country and the rest of the world. Current Accounts: Merchandise: It refers to the balance between exports and imports of tangible goods such as automobiles,computers,machinery and so on. A country with a large trade deficit is not as likely to import as much as a country with a trade surplus. The three major components of the Capital account:A Current account deficit is financed by a surplus in the Capital account and vice versa. Elements of balance of payment. The trade position of the country is reflected by the current account. A summary of all payments and receipts by individuals, businesses and the governmentLearn 100% online from anywhere in the world. The BoP or balance of payments record the undertakings or transactions of commodities, assets and services between citizens of a nation with the rest of the world for a stated time frame frequently every year. Balance of Payments refers to the systematic and summary record of a country’s economic and financial transactions with the rest of the world, over a period of time.In a layman’s language, anything that affects the financial and accounting entries of a country with respect to the rest of the world is counted in Balance of Payments. It is also known as the balance of international payments and if often abbreviated as BOP. These items are Foreign Direct Investments – FDIs, Foreign Institutional Investments – FIIs, assistance and external borrowings.The above mentioned is the concept that is explained in detail about The Balance of Payments for the class 12 students. It reflects trade position of the country. Q.2-WHAT ARE THE TWO COMPONENTS OF BALANCE OF PAYMENT? Trade-in commodities comprises exports and imports of commodities. There are 2 main accounts in the BoP –Current Account is the record of business in commodities, transfer payments and services. Introduced by Scottish economist, Adam Smith, in his 1776 work, “An Inquiry into the Nature and Causes of the Wealth of Nations,”Market economy is defined as a system where the production of goods and services are set according to the changing desires and abilities of the marketThe concept of Purchasing Power Parity (PPP) is used to make multilateral comparisons between the national incomes and living standards of different countries.

On the other hand, sale of assets like sale of the share of an Indian company to a Japanese customer is a credit on the capital account.