Balance of payments, Managerial Economics

Assignment Help:

BALANCE OF PAYMENTS

The Balance of Payments of a country is a record of all financial transactions between residents of that country and residents of foreign countries.  (Residents in this sense does not just refer to individuals, but would also include companies, corporations and the government).  Thus all transactions are recorded whether they derive from trade in goods and services or transfer of capital.

Like all balance sheets, the balance of payments is bound to balance.  For if the country has "overspent", then it must have acquired the finance for this "overspending" from somewhere (either by running up debts or using its reserves), and when this item is included in the accounts they will balance.  It follows therefore that when reference is made to a balance of payments "deficit" or "surplus", this only looks at a part of the total transactions, e.g. that part involving trade in goods and services, which is termed the "Balance of Payments on the current account"

If   the value of exports exceed the value of imports the balance of payments is said to be in Trade Surplus.  This is regarded as a favourable position because a persistent trade surplus means lower international debts.  Also, a trade surplus is regarded as a sign of success in the country's trade with other countries and is, therefore, politically desirable.

On the other hand, if the value of imports exceed the value of exports, the balance of payments is in trade deficit. This is an unfavourable position because a persistent balance of payment trade deficit means the country's foreign exchange reserves are being run down and so is its ability to pay for its imports and settle its international debt.  Also persistent balance of payments trade deficit is regarded as a sign of failure in the country's trade with other countries and is therefore politically undesirable.


Related Discussions:- Balance of payments

Arguments against monopoly, Arguments against Monopoly However monopol...

Arguments against Monopoly However monopolies have been accused of the following weaknesses. Diseconomies of scale While the monopolistic firm ca

Traditional theoretical concepts to business behaviour, Traditional theoret...

Traditional theoretical concepts to actual business behaviour Accommodating traditional theoretical concepts to actual business behaviour and conditions: Managerial economic

Cause the equilibrium, a)      The production-possibilities curve is? b)...

a)      The production-possibilities curve is? b)      If there is a shortage in the provider of a product, we can conclude that its price: c)      An enhance in supply and a

Characteristics of money, Characteristics of Money Over time, therefor...

Characteristics of Money Over time, therefore, it became clear that for an item to act as money it must possess the following characteristics. Acceptability If

Price elasticity of two parallel demand curves, It can be geometrically pro...

It can be geometrically proved that two elasticity are equal, which is., QB=RD Let's first consider ΔAOB. If we draw a horizontal line from point Q to intersect the vertical axis a

Explain about inventory economies, Q. Explain about Inventory Economies? ...

Q. Explain about Inventory Economies? Inventory Economies: Role of inventories is to aid the firm in meeting random changes in the output and the input sides of the operations

What do you mean by market structure, Q. What do you mean by Market Structu...

Q. What do you mean by Market Structure? Market economy pricing is conditioned by market structure. There are various forms of market structures. Perfect competition is accorde

Fundamental concepts of decision-making theory, fundamental concepts of dec...

fundamental concepts of decision-making theory The fundamental concepts of decision-making theory have been culled from microeconomic theory and have been furnished with new t

Determinants of the money supply, Determinants of the money supply Two...

Determinants of the money supply Two extreme situations are imaginable.  In the first situation, the money supply can be determined at exactly the amount decided on by the Cen

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd