Balance of trade
Which transactions find out the balance of trade? When the balance of trade is in surplus?
Expert
Exports of goods and imports of goods find out BOT. Whenever the value of exports of goods is bigger than the value of imports of goods.
distinguish between autonomous transactions and accommodating transactions under balance of payments
Autonomous or public investment: It is a type of investment that is not of profit motivated.
The practice considers the Treasury’s elucidation of the consequence on macroeconomic adjustment of joining the euro.
Components of current account of BOP account: (A) Import-Export of goods(B) Import-Export of services(C) Unilateral transfers
Flexible exchange rate: The rate of exchange in terms of other currencies is determined by market forces of demand-supply.
Managed floating exchange rate: This is a system in which the central bank or Government permits the exchange rate to identify market forces although they take decisions to intervene whenever they feel it suitable.
Assume that El Salvador can generate coffee at lower opportunity costs than Spain, whereas Spain can generate olive oil at lower opportunity costs than El Salvador. The citizens of both countries can potentially profit from international trade since of the efficiency
Demand for foreign exchange is prepared to: (A) Purchase services and goods (B) Send gifts and funding(C) Speculate the value of foreign currencies, (D) Invest and procure financial assets
Balance of payment Accounts: It is the systematic record of all economic transactions among the residents of a country and rest of the world in a specified period (1-year) of time.
State the two sources of demand of foreign exchange: Import of services and goods and to acquire education in abroad.
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