...Definition: Balance of payments (BOP) accounts are an accounting record of all monetary transactions between a country and all other countries of the world. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The BoP accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. Britannica Concise Encyclopedia: Systematic record of all economic transactions during a given period between residents (including the government) of one country and residents (including the governments) of other countries. The transactions are presented in the form of double-entry bookkeeping. Barron's Banking Dictionary: Accounting of a country's economic transactions with foreign countries in a stated period of time, normally one year. The balance of payments for any country is divided into two broad categories: the Current Account representing import and export trade, plus income from tourism, profits earned overseas, and interest payments; and the capital account, representing the sum of bank deposits, investments by private investors, and debt securities...
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...How to correct the Balance of Payment ? Solution to correct balance of payment disequilibrium lies in earning more foreign exchange through additional exports or reducing imports. Quantitative changes in exports and imports require policy changes. Such policy measures are in the form of monetary, fiscal and non-monetary measures. Monetary Measures for Correcting the BoP ↓ The monetary methods for correcting disequilibrium in the balance of payment are as follows :- 1. Deflation Deflation means falling prices. Deflation has been used as a measure to correct deficit disequilibrium. A country faces deficit when its imports exceeds exports. Deflation is brought through monetary measures like bank rate policy, open market operations, etc or through fiscal measures like higher taxation, reduction in public expenditure, etc. Deflation would make our items cheaper in foreign market resulting a rise in our exports. At the same time the demands for imports fall due to higher taxation and reduced income. This would built a favourable atmosphere in the balance of payment position. However Deflation can be successful when the exchange rate remains fixed. 2. Exchange Depreciation Exchange depreciation means decline in the rate of exchange of domestic currency in terms of foreign currency. This device implies that a country has adopted a flexible exchange rate policy. Suppose the rate of exchange between Indian rupee and US dollar is $1 = Rs. 40. If India experiences an adverse...
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...BALANCE OF PAYMENTS: Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The Balance of payments accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. According to ‘American Heritage Dictionary’: Balance of payments is a systematic record of a nation's total payments to foreign countries, including the price of imports and the outflow of capital and gold, along with the total receipts from abroad, including the price of exports and the inflow of capital and gold. According to ‘Oxford Dictionary of Geography’: Balance of payments is a comparison between the payments made by one country to other nations of the world and the revenue it receives from them. If receipts exceed outgoings, the balance is positive. The capital account records payments made in settlement of old debts or establishment of new ones; the current account shows payments made on goods and services, including interest payments...
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...Chapter 03 Balance of Payments True / False Questions 1. Over half of all dollar bills in circulation are held outside American's borders. True False Multiple Choice Questions 2. The current account balance, which is the difference between a country's exports and imports, is a component of the country's GNP. Other components of GNP include A. consumption and investment and government expenditure. B. consumption and government expenditure and net exports. C. consumption and net exports and government expenditure. D. consumption less imports. 3. If the United States imports more than it exports, then this means that A. the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. B. the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus. C. the U.S. dollar would be under pressure to appreciate against other currencies. D. both b) and c) are correct 4. Balance of payments A. is defined as the statistical record of a country's international transactions over a certain period of time presented in the form of a double-entry bookkeeping. B. provides detailed information concerning the demand and supply of a country's currency. C. can be used to evaluate the performance of a country in international economic competition. D. all of the above 5. If a country is grappling with a major balance-of-payment difficulty, it may not be...
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...largest trading partner of Bangladesh just after USA in 2003. India’s position is at the top for Bangladesh’s imports from the world (IMF: Direction of Trade Statistics, June 2004). Therefore, an analysis of current trade status between the two nations, obstacles and opportunities for mutual trade expansion is very critical for economic development of both countries, especially of Bangladesh, as Bangladesh has been suffering from historical trade deficit with India since its independence. The trade deficit has been increasing exponentially since the recent past. Official data show that compared to 1983, trade deficit in 2003 is more than 46 times higher1 (IMF: Direction of Trade Statistics). This growing deficit is a cause of serious concern for Bangladesh and has important economic and political implications. Hence the importance of the study is realized, and it is expected that the study will help policy makers to understand the roots of the problems on the way of trade expansion, and to formulate and execute the appropriate policy measures to mitigate or remove these problems. With this objective in mind, this paper makes an attempt to deal with the issues of bilateral trade relationship between Bangladesh and India. Background of the Study: We are the students of B.B.A. department of Southeast...
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...Fiscal Adjustment Fiscal Affairs Department International Monetary FundContentsPrefaceIntroductionWhy May Fiscal Adjustment Be Needed? The Impact of Fiscal Policy on Macroeconomic Policy Objectives Inflation External Current Account Growth Fiscal Adjustment to Ensure Sustainability Links to Other Policy InstrumentsHow Should the Fiscal Stance Be Assessed? Fiscal Impact of Alternative Methods of Deficit Financing Other Measures Used to Assess the Fiscal Stance The Sensitivity of a Fiscal Assessment to the Time Frame of Analysis Definition of Government Accounts for Macroeconomic Analysis Coverage of Government Operations Timing of the Impact of Fiscal Transactions Defining the "Overall Fiscal Balance"How Much Fiscal Adjustment Is Required? A Framework for Fiscal Adjustment Determining the Amount of Fiscal Adjustment Reducing the Fiscal Deficit Quality of AdjustmentHow Should Fiscal Adjustment Be Effected? Measures to Improve the Tax System and Increase Revenue Characteristics of a Desirable Tax System Design of Major Taxes Rationalization of Expenditure Policies Expenditure Reduction in the Short Run Structural Public Expenditure ReformReferencesBoxes1. Adverse Consequences of Excessive Fiscal Expansion for Growth2. The Exchange Rate Effects of Fiscal Policy3. Quasi-Fiscal Activities of Public Financial Institutions4...
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...Increases and falls in the production are shown through the business cycle as well as income and the expenditure of the country over a period of time. During a boom the demand of products get so high that manufacturers cannot supply these products and as an alternative they have to put the prices higher. With the prices going higher the result of this is rising inflation. As there are so many costs increasing the price of products becomes so high that the demands of these products start to fall as people are unable to pay for them. If this occurs this then leads to productivity falling as businesses do not need to make as many products or services being used so they start to cut costs. At this point businesses start to reduce the number of staff that they have or reduce prices to try and increase the demand of products. Profits also start to fall. After this an economy could fall into a recession. Once an economy has reached recession getting out of it could be difficult for it to get out because of the cycle of recession. For an economy to get out of recession is by some form of external stimulus either from the government or another investor. Once jaguar Land rover increases their prices, the demand for their products starts to fall. As the demand of their products start to...
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...General Certificate of Education Advanced Subsidiary Examination June 2013 Economics Unit 2 ECON2 The National Economy Friday 17 May 2013 1.30 pm to 2.45 pm For this paper you must have: an objective test answer sheet a black ball-point pen an AQA 8-page answer book. You may use a calculator. Time allowed 1 hour 15 minutes Section A (ECON2/1) Answer all questions on your objective test answer sheet. Use a black ball-point pen. Do not use pencil. Do all rough work in this question paper, not on your objective test answer sheet. Section B (ECON2/2) Answer EITHER Context 1 OR Context 2. Use black ink or black ball-point pen. Pencil should only be used for drawing. Write the information required on the front of your answer book. The Examining Body for this paper is AQA. The Paper Reference is ECON2/2. Information The maximum mark for this paper is 75. There are 25 marks for Section A. Each question carries one mark. No deductions will be made for wrong answers. There are 50 marks for Section B. The marks for questions are shown in brackets. You will be marked on your ability to: – use good English – organise information clearly – use specialist vocabulary where appropriate. Advice You are advised to spend no more than 25 minutes on Section A and at least 50 minutes on Section B. G/T90774/Jun13/ECON2 6/6/6/ ECON2 2 Section A: Objective Test Answer all questions in Section A. Each question carries 1 mark. No deductions will be made for wrong...
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...level (X) was at £126bln while the Import’s level (Z) at £125bln. Considering that the level of X increases the actual national output and the level of Z decreases it, them having a marginal difference amongst them (known as the Balance of Trade), had in this instance a minor effect on Y by £1bln. - The Budgetary condition of the economy at year 5 involved a surplus of £3bln suggesting that the Governments inflows from Taxes [T= (TAX Rate * Y) + (VAT Rate * (C+I))] exceeded the Government’s outflows including the Government expenditure, TransU and TransW (transfers to Unemployment and Welfare respectively). - The real Rates of Interest (Real R), i.e. measuring the price of money and determined by the demand and supply of money were at 6.4% while ForR (Foreign Interest Rates) were at 5%. - Unemployment (U) stood at 6.5% while the natural rate of unemployment (WGR) was 6%. - Inflation (INF) was at 4.4% with Foreign Inflation (ForINF) remaining at 4%. - There was an overall Balance of Payment (BP) surplus which resulted in Sterling £ being appreciated. Year 6 Year 6 Shock - Estimation for an Inflation increase by 5% - Expectation of Large Capital Outflow of £20bln Actions Taken - Decided to increase Money Supply (M) by 15% in order to reduce R of Year 5 (6.4%) to...
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...Introduction Leading and decisive role in the formation and development of the economic structure of any modern society is government regulation, carried out under the authority of the chosen policy. One of the most important mechanisms that allow the state to carry out economic and social regulation is financial mechanism- the financial system of the society, the main element of which is the state budget. Through the financial system the state forms centralized funds and influences the formation of decentralized funds, providing the opportunity to carry out functions of state authorities. The state budget, as the main means of mobilization and expenditure of resources of the state gives to political power a real opportunity to influence the economy, to encourage the development of priority sectors of the economy, provide social support to vulnerable population groups. Budget – an important prerequisite and a mean of reproduction process. By means of the budget conditions for implementation of social programs, ensuring safety of environment, stimulation of scientific and technical progress, maintenance of defense capacity, and performance of other state functions are created. Relevance of this course work is that the central place in the financial system of any country is the state budget – the largest pool of money that the government uses to finance its activities. At the expense of the state budget the army, police, non-productive sphere, apparat of state administration...
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...1. Explain three gains form trading internationally. International trade is made exchange product, service, and factor of product in different country or place. International trade also called word trade. It reflects that Countries in the world economy on the coexistence relationship. * to exploit comparative advantage 2. Providing a recent example, explain what is meant by free trade. Free Trade mean that state cancel constraints and obstacles on import and export trade, Cancel all kinds of preferential treatment and privileges of national import and export commodities，without interference and restrictions for Import and export commodities, let goods free import and export，Free competition in the domestic market of trade policies. For example: In April 7,chain with New Zealand concluded free trade agreements（FTA），this is first free trade agreement with developed countries. Now chain have building or discuss FTA have 12, involved 29 countries or place, cover 1/4 of chain total foreign trade. In 2007 Trade between the two countries reached 159.9 billion U.S. dollars. Expected in 2008, bilateral trade will reach 170 billion U.S. dollars，2010 get200 billion，5years later 2013 will get 250 billion. 3. Explain absolute and comparative advantage what is meant by free trade. Absolute advantage is said occur when one country can product a good or service to a pre-determined quality more cheaply than another country. Comparative advantage was first described...
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...Balance of Trade The balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and occurs when value of exports is higher than that of imports; a negative balance of trade is known as a trade deficit or a trade gap. Bangladesh Balance of Trade Bangladesh recorded a trade deficit of 977 USD Million in November of 2012. Balance of Trade in Bangladesh is reported by the Bangladesh Bank.Bangladesh Balance of Trade averaged -1209.67 USD Million reaching an all time high of -56.40 USD Million in August of 2009 and a record low of -5370.60 USD Million in June of 2008. Bangladesh exports mainly ready made garments including knit wear and hosiery (75% of exports revenue). Others include: Shrimps, jute goods (including Carpet), leather goods and tea. Bangladesh main exports partners are United States (23% of total), Germany, United Kingdom, France, Japan and India. Bangladesh imports mostly petroleum product and oil, machinery and parts, soyabean and palm oil, raw cotton, iron and steel and wheat. Bangladesh main imports partners are China (17% of total), India, Indonesia, Singapore and Japan. Along with the growth in exports, the import payments of Bangladesh also showed continuous increase. Export receipts as percent of GDP increased, amidst fluctuations, from 4.0 in 1974-75 to 6.9 in 1984-85, and further to 13.3 in 1994-95. Import payments as percent of the...
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...| | | SCHOOL OF BUSINES Project on: Balance of Payments Prepared By: Hassan ajami, Mansour daher, reda younes,ali Mohsen, Mohammad kanso Submitted To: Dr. habib awada Course BFIN 430 (International Banking & Finance). Spring 2013-2014 TABLE OF CONTENTS 1- INTRODUCING THE BOP CONCEPT: 1.1) Brief History 5 1.2) Basic Definition 5 1.3) System of Recording 7 1.3.1) Identifying Transactions 7 1.3.2) The Debit & Credit System 9 2- GENERAL STRUCTURE OF THE BOP: 2.1) Main Components 12 2.1.1) Current Account 12 2.1.2) Trade Balance 15 2.1.3) Capital Account 16 2.1.4) Financial Account 18 2.1.5) Errors & Omissions 22 2.2) Complications 23 2.2.1) Accounts Interrelation 23 2.2.2) Deficit & Surplus Dilemmas 25 3- BOP FROM EQUILIBRIUM TO DISEQUILIBRIUM 3.1) BOP in Equilibrium 27 3.1.1) Equilibrium Conditions 27 3.1.2) Equilibrium Model 27 3.1.3) Types of Equilibrium 29 3.2) BOP in Disequilibrium 29 3.2.1) Causes of Disequilibrium 29 3.2.2) Types of Disequilibrium 32 3.2.3) Consequences of Disequilibrium 33 3.2.4) Measures to Eliminate Disequilibrium 33 3.2.5) Demonstrating Disequilibrium 35 4- STUDYING THE LEBANESE BOP 4.1) Historical Events: 1999 and before 37 4.2) Major Events of the Decade: 2000-2008 38 4.3) Recent Events: 2009-2010 40 5- CONCLUSION Importance of BOP 44 1- INTRODUCING...
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...Aggregate supply (AS) | The level of real national output that producers are prepared to supply at different average price levels. | Availability of credit | Funds available for households and firms to borrow. | Balance of payments (BOP) | A record of all the currency flows into and out of a country in a particular time period. | Balance of trade | The difference between the money value of a country’s imports and its exports. Balance of trade is the largest component of a country’s balance of payments on current account. | Balance of trade in goods | The part of the current account measuring payments for exports and imports of goods. The difference between the total value of exports and the total value of imports of goods is sometimes called the ‘balance of visible trade.’ | Balance of trade in services | Is part of the current account and is the difference between the payments for the exports of services and the payments for the imports of services. | Balanced budget | Achieved when government spending equals government revenue. | Bank of England | The central bank in the UK economy which is in charge of monetary policy. | Bank rate | The rate of interest the Bank of England pays to commercial banks on their deposits held at the Bank of England. | Budget deficit |...
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...the total demand for all goods and services produced in an economy in a given price level and time period. AD = C + G + I + (X – M) C means consumer expenditure. This makes up the majority of AD in most countries (about 65% of the total). I means investment in capital goods from firms, and this is the most volatile component of AD. This typically accounts for 15-20% of GDP, and the majority (75%) is from private sector businesses. G means government spending on state-provided goods and services. Transfer payments (state benefits) do not count because these payments are not producing an output – they are a transfer of money from one group to another. X means exports; M means imports. Exports are goods sold to overseas countries and imports are what the UK buys from foreign countries. (X – M) represents net exports. If this is positive, there is a trade surplus which adds to AD. Conversely, a negative net exports value means there is a trade deficit, which reduces AD. Consumer Expenditure Consumer expenditure is influenced by… The amount of real disposable income is the main influence on consumer expenditure. Households and economies with more disposable income tend to spend more in total than poorer ones. The proportion of income that is spent is called the average propensity to consume (APC). Wealth (the value of a stock of assets) affects C. Wealthier people tend to spend more. Wealth can be spent and can be used to borrow against. It also results in greater consumer...
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