Question

1. What is meant by the balance of payments?

b. In what way is the balance of payments a summary statement?

c. What is meant by an international transaction?

d. In what way is the time element involved in measuring a nation’s balance of payments?

e. What international transactions are included in the current account?

f. What does the capital account include?

Answer 1

Answer ( Balance of payment- it is a statement of account of all financial transactions of one nation with rest of the world during an accounting year.

Answer )The balance of payments is the summary statement of the flow of economic transactions between the residents of one country and the rest of the world over a given period of time. In this country, the Department of Commerce is responsible for calculating the balance of payments.

Answer)An international transaction is a money transfer that crosses national borders, frequently involves two different currencies, and can even involve three currencies if a reserve currency, such as the US dollar is used.

Answer) due to the time dimension, it is the flow of goods, services, gifts and assets betweenthe residents of a nation and the residents of other nations during a particular periodof time, usually a calendar year.

Answer)The current account represents a country's imports and exports of goods and services, payments made to foreign investors, and transfers such as foreign aid.

Answer)The components of the capital account include foreign investment and loans, banking and other forms of capital, as well as monetary movements or changes in the foreign exchange reserve. The capital account flow reflects factors such as commercial borrowings, banking, investments, loans, and capital.