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Open Economy Macroeconomics

Question

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Distinguish between balance of trade and balance on current account.

Solution

Basis of Difference	Balance of Trade	Balance on Current Account
Meaning	Balance of Trade is the record of visible transactions of the country.	It is a record of the visible as well as invisible and unilateral transactions.
Components	It is the balance of exports and imports of all physical goods of the country.	It is the balance of visible trade, invisible trade and unilateral transfers.
Nature of transactions	It records the transactions relating to physical goods only.	It records the transactions relating to goods, services as well as unilateral transactions.

Some More Questions From Open Economy Macroeconomics Chapter

What are the features of Balance of Payment Account?

Describe components of Balance of Payment Account.

What is meant by visible and invisible items in BOP Account? Give two examples of invisible items.

What is balance of trade?
or
Which two transactions determine BOT?
or
What is the difference between the values of exports and imports of goods called?
or
When will BOT show a surplus?
or
When is there deficit in BOT?
or
What is balance of visible items in BOP accounts called?

BOT shows a deficit of र 5,000 crores and value of imports are र 9,000 crores. What is the value of exports?

The value of a country’s import of goods is र 200 crores, and value of export is र 250 crores. Find out its BOT.

A country’s balance of trade is र (–) 60 crores and value of import of goods is र 100 crores. out value of export of goods.

What is meant by balance of payment (BOP) account?
or
What does BOP account record?
or
Where are borrowings from abroad recorded and why

Balance of payment always balances. Comment.

When does a situation of deficit/surplus in BOP arise?
or
Explain meaning of deficit in BOP.

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