BBA 3rd Year Foreign Trade And Economic Growth Long Question Answer Notes Last 3 Year examination papers solved Unit-wise division of the content Study material Notes
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BBA 3rd Year Foreign Trade And Economic Growth Long Question Answer Notes | Index
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Section-C
(Long Answer Questions)
Q.1. What do you mean by balance of payments? Explain in brief.
Ans. Balance of Payments : The balance of payments (BOP) is an accounting system that records the economic transactions between the residents and government of a particular country and the residents and governments of the rest of the world during a certain period of time, usually a year. Economic transactions include exports and imports of goods and services, capital inflows and outflows, gifts and other transfer payments and changes in a country’s international reserves. For the governments, the balance of payments (BOP) provides clues about expectations relating to such matters as the volume of different types of trade and capital flows, the movement of exchange rates and the probable course of economic policy.
In particular, a country’s own balance of payments is important to investors, multinational companies, business managers, consumers and government officials because it affects the value of its currency, its policy towards foreign investments and also influences important macroeconomic variables like gross national product, interest rates price levels, employment scenario and exchange rate. The monetary and fiscal policy of a country also takes into account the BOP position of a country.
The balance of payments (BOP) measures the flow between any individual and all other countries. It is used to summarise all international transactions for that country during a specific time period, usually a year. The BOP is determined by the country’s economy and status in international trade. It reflects all payments and obligations towards foreigners. Balance of payments is one of the major indicators of a country’s status in international trade dealings.
The balance of payments, like other accounting statements, is prepared in a single currency. usually the domestic. Foreign assets and flows are valued at the exchange rate of the time of transaction.
BOP Definition
The definition: “The balance of payments is a statistical statement that summarises transactions between residents and non-residents during a period.”
The current account consists of the goods and services account, the primary income account and the secondary income account.
The financial account records transactions that involve financial assets and liabilities that take place between residents and non-residents.
The capital account is the international account showing : (1) capital transfers receivable and payable; and (2) the acquisition and disposal of non-produced non-financial assets.
In economic literature, “capital account” is often used to refer to what is now called the financial account and remaining capital account in the IMF manual and the system of national accounts. The use of the term capital account in the IMF manual is designed to be consistent with the system of national accounts, which distinguishes between capital transactions and financial transactions.
Q.2. What is Balance of Trade (BOT)? Give various factors which affect BOT. Explain in brief.
Or What is meant by Balance of trade? (2015)
Ans. The balance of trade forms a part of the export and import of a country. It includes international aid. If the export is in surplus, the country’s net international asset position increases correspondingly. Equally, a deficit decreases the net international asset position.
The trade balance is identical to the difference between a country’s output and its domestic demand (the difference between what goods a country produces and how many goods it buys from abroad; this does to produce for the domestic market).
Measuring the balance of payments can be problematic because of problems with recording and collecting data. As an illustration of this problem, when official data for all the countries of the world are added up, exports exceed imports by a few per cent; it appears the world is running a positive balance of trade with itself. This cannot be true, because all transactions involved are equal or in the account of each nation. The discrepancy is widely believed to be explained by transactions intended to launder money or evade taxes, smuggling and other visibility problems. However, especially for developed countries, accuracy is likely to be good. Factors Affecting the Balance of Trade Figures Include