Explain Balance of Payments (BoP) in economics.
Understand the Problem
The image is of a textbook page explaining the concept of Balance of Payments (BoP) in economics. The text covers the meaning of BoP, its components, and related terms like 'visible trade,' 'invisible trade,' inflows and outflows of foreign exchange, and how receipts and payments are recorded in the BoP accounts.
Answer
The Balance of Payments (BoP) is a record of all monetary transactions between a country and the rest of the world over a period of time.
The Balance of Payments (BoP) is a statement of accounts showing all monetary or economic transactions between one country and the rest of the world during a specific time period, usually one year. These transactions can be made by individuals, firms, or the government.
Answer for screen readers
The Balance of Payments (BoP) is a statement of accounts showing all monetary or economic transactions between one country and the rest of the world during a specific time period, usually one year. These transactions can be made by individuals, firms, or the government.
More Information
The BoP accounts record all receipts and payments of foreign exchange. Receipts are recorded as credit items, while payments are recorded as debit items.
Tips
A common mistake is to confuse the balance of payments with the balance of trade, which only includes the value of exports and imports of goods.
Sources
- What Is the Balance of Payments (BOP)? - Investopedia - investopedia.com
- What Is the Balance of Payments (BOP)? - Investopedia - investopedia.com
- Lesson summary: The balance of payments (article) | Khan Academy - khanacademy.org
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