Balance of payment is an accounting statement that includes all
monetary transactions between a nation and the rest of the World. It can be divided into three
parts. Your statement is true.
The three parts that balance of
payment is generally divided into are:
Current account: this
includes all funds that move in and out of the nation when goods and services are exported and
imported. It also includes some categories of income from assets in other nations, and cross
border transfer of funds as gifts.
Capital account: this is the net
foreign direct investment and the flow of funds when there are transactions in securities in the
nation by foreign entities and when those living in the nation transact in securities with the
rest of the World.
A third part of the balance of payment is the
change in foreign exchange reserves. This is largely influenced by the capital account and the
current account.
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