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Understand the balance of payments
Balance of payments, commonly denoted as BOP, is the record regarding economic transaction that takes place between the residents of a country with a foreign country within a specified period. Each of those transactions is recorded and maintained besides the national account. The operations can be carried out by the government, any firm, or individuals.
The balance of payments comprises both visible and invisible transactions that are conducted.
To understand how it works, it is essential that you opt for balance of payments homework help. It will help you to understand how the transactions that are received are regarded by positive sign and outflow of cash is denoted by a negative sign.
What are the components of balance of payments?
The balance of payments mostly includes three elements. This three help to record the transactions that are carried out internationally. With balance of payments assignment help, you can understand the nuances of each of these elements better. These are:
- Current account: It is a record of what a country is earning or spending, depending on whether it faces a deficit or surplus in cash. The balance of trade, factor income, and cash transfers, together form the current account.
- Capital account: It is the net change in the ownership of the assets of a country. It had reserve accounts, loans, and investments that are carried out between the country and the world. It finances the surplus or the deficit created by the current account.
- Balancing item: It is an amount that states any errors or omissions that result in surplus or deficit in any of the accounts. It ensures that the sum of both the accounts amount to zero.
What causes a deficit in balance of payments?
Often, there is deficit in the balance of payments. Balance of payments homework help makes you understand the various causes that result in such deficits. Three factors might be responsible. They are social, political and economic factors. The causes are as below:
- Change in tastes that result in a decrease in exports.
- Investors are discouraged when there is no stable government.
- Capital outflow results when the political scenario is unstable.
- A decrease in the demands for the domestic goods of a country.
- When developing countries rely more on imports.
- If the rate of inflation is high.
- Instability in business cycle
What are the types of deficit?
With balance of payments assignment help, you can understand the different type of deficit that occurs. They are:
- A fundamental deficit
- Deficit in the current account
- Trade deficit
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