Question

Write a note on the balance of trade and balance of payment.

Answer 1

Instructions:
Write about the meaning of balance of trade and its circumstances and the meaning of balance of payment and its formula.

Solution:

• Balance of trade refers to the difference between the monetary values of exports and imports of goods and services​ of a country​.
• Favourable balance of trade is a situation in which the value of exports is greater than the value of imports.
• Unfavourable balance of trade is a situation in which the value of imports is greater than the value of exports.
• Balance of payment refers to the net value of exports and imports of goods and services and the net capital flow in a year​.
• Balance of payments = Net value of exports and imports of goods and services plus net capital flow.