Current account, Managerial Economics

Assignment Help:

The Current Account

This records all transactions involving the exchange of currently produced goods and services and is subdivided into

i.          Visibles:

A record of all receipts from abroad the export of goods and all expenditures abroad on the import of goods.  When these are compared, this is known as the "balance of  trade" (though it would be properly called the "balance of visible trade").

ii.          Invisibles:

A record of all receipts from abroad in return for services rendered and all expenditure abroad for foreign services.  It also includes receipts of profits and interest earned by investments abroad, and similarly profits and interest paid abroad to foreign owners of capital in the country are included in Expenditure.  The comparison of all the debits (Expenditure abroad) and credits (receipts from abroad) arising from visibles and invisibles is known as the "balance of payments on current account" and is the best indicator of the country's trading position.

If the value of exports exceeds 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 the country's foreign exchange reserves are rising and so its ability to pay for its imports and settle its 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 exceeds the value of exports, the balance of payments is in trade deficit.  This is an unfavourable position because a persistent balance of payments trade deficit means that the country's foreign exchange reserves are being run down and so is its ability to pay for its imports and settle its international debts. Also a 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:- Current account

Explain the relationship between average and marginal cost, Question: i...

Question: i) If X and Y are different processes producing the same commodity and the joint total cost (TC) is given by: TC = X 2 + 2Y 2 - 3XY Using Lagrange Multiplier,

Please Help, Jane, the manager of a company manufacturing air-conditioning ...

Jane, the manager of a company manufacturing air-conditioning units can choose between two production technologies for a new product line. If she chooses and installs technology 1,

Mixed economy, The Mixed Economy There are no economies in the world w...

The Mixed Economy There are no economies in the world which are entirely 'market' or planned, all will contain elements of both systems. The degree of mix in any one econom

Leading economic indicators, Leading Economic Indicators The 11 ke...

Leading Economic Indicators The 11 key economic indicators that have been establish to lead business cycle turning points. Of the 11, four are basically used in business;

Fixed exchange rate, Country A has a fixed exchange rate with country B. Du...

Country A has a fixed exchange rate with country B. Due to a recession in country B, demand for A's goods falls. Draw what would happen on the graph below. On the graphs, draw what

Explain the concept of demand function, Q. Explain the concept of demand fu...

Q. Explain the concept of demand function? Identical to the demand theory which pivots around the concept of demand function, theory of production revolves around the concept o

Remedies for unemployment, REMEDIES FOR UNEMPLOYMENT The measures appro...

REMEDIES FOR UNEMPLOYMENT The measures appropriate as remedies for unemployment will clearly depend on the type and cause of unemployment.  Broadly they can be divided into:

what is the elasticity of labor demand , Asuume there are two inputs in th...

Asuume there are two inputs in the production function, labor & capital, and these two inputs are perfect substitutes. The existing technology permits one machine to do the work of

Long-term policies to cure balance of payment deficits, Long-Term Policies ...

Long-Term Policies One long term option of tackling balance of payments deficit is export promotion .  In the long run this is the best method of improving a balance of payme

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