|Many times we read about 'Balance of Payment' in economic literature. Which of the following statement(s) define(s) the term correctly?|
|I. It is a record of all transactions made between one particular country and all other countries.|
|II. It is a record of all transactions made between the countries wherein the payment was made in a currency other than US dollars.|
|III. It is a record of all exports/imports from/by a country and difference in amount of both in terms of payment in US dollars.|
A) Only I
B) Only III
C) Only II
D) Both I and II
Correct Answer: A
Solution :[a] Balance of Payment is a statement that summarizes an economy's transactions with the rest of the world for a specified time period. The balance of payments, also known as balance of international payments, encompasses all transactions between a country's residents and its non-residents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. The balance of payments classifies these transactions in two accounts - the current account and the capital account. The current account includes transactions in goods, services, investment income and current transfers, while the capital account mainly includes transactions in financial instruments. An economy's balance of payments transactions and international investment position (IIP) together constitute its set of international accounts.
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