Question
Download Solution PDFThe Balance of Payment Account of an economy is related to the ________.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is external sector.Key Points
- The balance of payments summarizes an economy's international economic dealings.
- These transactions consist of transfer payments as well as the export and import of products, services, and financial assets (like foreign aid).
- The current account, the capital account, and the financial account are the three primary subcategories of the BOP.
- The influx and outflow of goods and services into a nation are represented by the current account.
- All overseas capital transfers are noted in the capital account.
- International monetary flows associated with investments in companies, properties, bonds, and stocks are recorded in the financial account.
- The BOP should be 0 when the current account is in balance with the total of the capital and finance accounts, but this rarely happens.
Additional Information
- The balance of payments deficit is the shortfall when autonomous foreign exchange payments exceed autonomous foreign exchange receipts.
- Foreign exchange transactions that are done independently of the state's balance of payments and for a person's own benefit are referred to as autonomous transactions.
Last updated on Jun 2, 2025
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