![]() ![]() ![]() The balance of this visible trade is known as the trading balance. This is the net for export and import of goods (material). The four major components of the current account are as follows: The current account should be equal to the capital associated with the financial accounts. As mentioned earlier, the BoP should be zero. The BoP consists of three main components - the current account, the financial account, and the financial account. Now let’s understand the different parts of the BoP. ![]() It provides valuable information for the analysis and understanding of international economic cooperation.īy studying its BOP statement and its components closely, one will be able to identify trends that may be beneficial or harmful to the regional economy and thus, take appropriate action. The BOP statement helps the Government to decide on financial and trade policies. The BOP statement can be used as an indicator to determine whether the value of a country's currency is rising or falling. The BOP of the country reflects its financial and economic status. The BOP of the country is important for the following reasons: Both of these situations have short-term and long-term effects on the global economy. The BoP deficit, on the other hand, indicates that the country’s assets are more than exports. The BoP surplus indicates that exports are higher than exports. The BoP country statement clearly shows that the country has either a lot of money or a shortage. That is, income and expenditure must balance. Keeping a record of these transactions helps the country monitor cash flow and develops policies that can help build a strong economy. These records include transactions made by individuals, companies and governments. ![]() Payment Balance or BoP is a statement or record of all financial and economic transactions that are made nationally and internationally over a period of time (quarterly or yearly). ![]()
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