ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Stock
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Flow
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Flow as well as stock
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Neither Flow nor stock
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Detailed explanation-1: -Balance of Payments is a ‘FLOW’ concept. It is an accounting statement showing economic transactions between residents of a country and rest of the world in a given “PERIOD OF TIME".
Detailed explanation-2: -The balance of payments (BOP) statistics describe the external stability of the economy in terms of both real and financial transactions and is part of the system of national accounts. The balance of payments is comprised of current, capital and financial accounts.
Detailed explanation-3: -BOP is a flow concept as it is measured over (during) a period of time. Since BOP is measured over a time interval, it can be said that they have an element of time attached to them. Similarly, current account is also a flow variable.
Detailed explanation-4: -Capital formation is measured over a period of time hence it is a flow concept.
Detailed explanation-5: -The Balance of Payments is a record of transactions between individuals or entities of one country with the rest of the world, within an accounting year. It helps governments examine imports and exports of goods and services to ascertain the state of their economy.