Balance of Payment (BOP) Exam Questions with Correct Answers

Balance of payments Correct Answer a record of the transactions that a country has with the rest of the world components of BOP accounts Correct Answer 1) the current account -balance of trade: 1. trade in goods-the trade(exports and imports) in visible goods 2. trade in services- the trade in invisble goods 3. income flows-net investment income e.g. profits, interest payments, dividends on shares 4. current transfers: the net transfers of money by governent and individuals e.g. grants for overseas, migrantworkers' remittances sent back to their own countries 2)the capital account: records capital movements in terms of assets(including physical assets such as purchase of land) and liabilities(debt forgiveness) into and out of a country 3)the financial account: records capital inflows into a country and the capital outflows out of a country, resulting from investments(such as building of factories) *also includes loans and changes in reserves net errors and omissions Correct Answer transactions that go unrecorded caused by time delay in reporting the transactions balancing items Correct Answer a positive or negative figure that accounts for any statistical errros in the balance of payments and ensures that the accounts, when added together, come to zero BOP deficit Correct Answer money outflow is greater than money inflow (expenditure exceeds income) BOP surplus Correct Answer money inflow is greater than money outflow(income exceeds expenditure) BOP equilibrium Correct Answer refer to a situation where the decifits and surpluses of a country are cancelled out, both in a given year and over a period of time (For example, a current account deficit could be cancelled out by a financial account surplus) BOP disequilibrium Correct Answer refer to a situation where a country is experiencing a persistent deficit or surplus over a period of time current account deficit Correct Answer revenue from exports of goods and services, receipts of primary income and secondary income(income flow&current transfer) are