Foreign Sector — Flashcards

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The foreign sector refers to all economic transactions between a country and other countries. It includes imports and exports of goods and services, as well as capital movements like foreign investmen…

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Balance of Trade (BoT) is the difference between the monetary value of a country’s exports and imports of physical goods (commodities). It includes only visible items. If exports > imports, it's a sur…

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'Visible trade' refers to the import and export of tangible goods like machinery, food, and clothing. These are called 'visible' because they can be seen and physically verified by customs officials a…

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A favourable Balance of Trade occurs when a country’s exports exceed its imports in value, leading to a surplus. An unfavourable Balance of Trade happens when imports exceed exports, resulting in a de…

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Balance of Payments (BOP) is a systematic record of all economic transactions between residents of a country and the rest of the world over a year. It includes current account, capital account, and of…

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The BOP always balances because every transaction has a corresponding credit and debit entry. Any deficit in one account is offset by a surplus in another. Statistical discrepancies are adjusted under…

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The Current Account includes: (1) Visible items (goods), (2) Invisible items (services like tourism, transport), (3) Income (interest, dividends), and (4) Unilateral transfers (remittances, gifts).

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The Capital Account records capital inflows and outflows such as Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), External Commercial Borrowings (ECB), and loans. It shows investme…