What are the types of balance of payment?

The balance of payment is the record of all the transactions that are made internationally. It includes both, the amount of money which a company has received known as credit and the amount a country has to pay, known as a debit. The BOP should be balanced i.e. zero but it is not the case most of the time. The three main types of BOP are: I. The current account – It includes the products and services which have been imported and exported in and out of the country respectively. II. The capital account – Here all the capital transfers are kept in the record that occurred internationally. This includes assets that are non-financial like lands, etc. III. The financial account – It includes all the records related to real estate, business, etc.

What are the objectives of the balance of payment?

The objective of the balance of payment of a country is to determine whether that country is making an ample amount of money to pay for its imports.

What is the Favourable balance of trade?

When a country exports more products than it imports from other countries, then that positive situation is called as favorable balance of trade. You can measure it by calculating the difference between the total amount of items exported and the total amount of items imported.

Does the trade balance include services?

No, it does not include any services but only the value of material goods.

What is an example of the balance of trade?

In some countries, it is a sure thing that trade deficit will occur. However, it does not always correctly state the health of an economy. For example, in the year 1976, the United States has faced a deficit because they were importing oil from outside.

What do you mean by free trade?

Free trade is meant to reduce obstructions during exports and imports. This ensures the process of exporting and importing to go smoothly. Under this policy between two or more nations, the tariffs and subsidies get reduced which ensures the easy ongoing of exports and imports.

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