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Balance of Payment refers to the recording of all economic transactions of a given country with rest of the world
FEATURES
SYSTEMATIC RECORD FIXED PERIOD OF TIME
SELF BALANCED
COMPONENTS
CURRENT ACCOUNT CAPITAL ACCOUNT FINANCIAL ACCOUNT
CURRENT ACCOUNT
It is a statement of actual receipts and payments in short-period. It includes the value of imports and exports of both visible and invisible items.
BOP On Current Account = (Visible + invisible Exports)-(visible + invisible Imports) OR
CONTD..
Balance of Payment on Current Account may be both balanced or unbalanced (in the sense of deficit or surplus). Disequilibrium of the BOP on Current Account is usually balanced by the medium of Capital Account.
CAPITAL ACCOUNT
Capital Account refers to financial transactions. All kinds of short-term and long-term capital transfers, movement of gold, payments on private account, payments and receipts on national institutional account and government loans, interest, grants, etc. are included in capital account.
CONTD..
If foreign ownership of domestic financial assets has increased more quickly than domestic ownership of foreign assets in a given year, then the domestic country has a Capital Account Surplus.
CONTD..
On the other hand, if domestic ownership of foreign financial assets has increased more quickly than foreign ownership of domestic assets, then the domestic country has a Capital Account Deficit.
FINANCIAL ACCOUNT
The financial account records transactions that involve financial assets and liabilities and that take place between residents and non-residents.
CONTD..
Official reserves assets include: gold reserves, foreign currencies, SDRs.
MACROECONOMICS
Macroeconomics is a branch of economics that deals with the performance, structure, behavior and decision-making of the entire economy, be that a national, regional, or the global economy. It helps in study of aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions.
MACROECONOMIC POLICIES
FISCAL POLICY
Fiscal policy involves the use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of aggregate demand, output and employment.
MONETARY POLICY
Monetary Policy refers to the steps taken by RBI to regulate the cost and supply of money and credit in order to achieve the socio-economic objectives of the economy.
BALANCE OF TRADE
When the difference in the value of imports and exports of only physical goods and visible items, is taken into account, it is called Balance of Trade.
DEFECIT OR UNFAVOURABLE
months of fiscal year (2009-10) on a balance of payments basis was large due to the steeper decline in the pace of exports than that of imports. The trade deficit on a BoP basis in Q1 (US$ 26.0 billion) was, however, less than that in Q1 of 2008-09 (US$ 31.4 billion).
conclusion