Balance Of Payments And Exchange Rate — Flashcards

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Balance of Payments is a systematic record of all economic transactions between the residents of a country and the rest of the world during a given period of time, usually a year. It is a flow concept…

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BOP has three defining features: systematic record, components, and flow concept. It records all economic transactions in an organised way, is divided into current account and capital account, and rel…

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Balance of Trade is the difference between the value of total imports and exports of visible material goods only. It is narrower than BOP and is also called the merchandise account balance.

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A favourable balance of trade occurs when exports of visible goods are greater than imports. An unfavourable balance of trade occurs when imports are greater than exports. Equilibrium in balance of tr…

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Visible items are exports and imports of goods, which can be seen and measured physically. Invisible items are exports and imports of services, which cannot be seen at the border. Services include fac…

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Factor services are services that lead to factor income, such as rent, interest, profit, and compensation of employees. Non-factor services are other services such as shipping, insurance, banking, and…

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Unilateral transfers are one-sided receipts or payments made without any good or service in return. They can be private or government transfers. Examples include gifts, remittances, scholarships, gran…

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Current Account is that part of BOP which records imports and exports of goods and services and unilateral transfers. It is also called the account of actual transactions because it includes items tha…