ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A change in foreign currency reserves
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B foreign aid
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C net errors and omissions
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D speculative currency flows
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Detailed explanation-1: -There are three components to the current account – the ‘trade balance’, ‘primary income balance’ and ‘secondary income balance’. In economic analysis or commentary, most attention is usually given to the trade balance, which records the difference between the value of our exports and imports of goods and services.
Detailed explanation-2: -A country’s balance of payments is represented by its current account, capital account, and financial account. The current account records the flow of goods and services in and out of a country (imports and exports). The capital account measures the capital transfers between U.S. residents and foreign residents.
Detailed explanation-3: -The balance of payments (BOP) transactions consist of imports and exports of goods, services, and capital, as well as transfer payments, such as foreign aid and remittances.
Detailed explanation-4: -The capital account includes Foreign Direct Investment, Foreign Portfolio Investment, External Commercial Borrowings, SDR. The capital account records all international purchases and sales of assets such as money, stocks, bonds, etc.