Question

A) define balance of payment B)why would it be useful to examine Ghana balance of payment data. C) discuss the primary accounts used to record balance of payments data and give examples of items recorded under each account.

Answer 1

A) The balance of payments is a statistical record of a country over a fixed period, generally a year, to keep the record of all types of international financial transactions in the double- entry bookkeeping system. The BOP explains about the net total saving status of country and economic output

B)

It is very useful to study a country’s BOP for many reasons as below.

First: to get detailed information of the demand and supply of country’s currency.

Second: to study the net supply and demand from country to global economy in form of export and import.

Third: To study relative performance of the country in global economy and international competition, generally country with high industrial output show surplus BOP.

Fourth: the Ghanaian BOP is the perseverance disequilibrium .

C)

The BOP has mainly three components: financial account, the capital account and the current account

The financial account includes, any changes in ownership by resident of foreign assets, ownership by foreigner in domestic assets. If foreign ownership is higher than domestic, results in a deficit. for examples selling of gold, purchasing corporate stocks etc.

The capital account is the smallest component in BOP, which includes all international transactions that don't directly affect a country's production, income, or savings. For example transfers of trademarks and copyrights etc.

The current account includes country's trade balance along with direct payments and net income. For examples, any type of cross boarder business activity and government infrastructure spending