INTERNATIONALFINANCE

INTERNATIONALFINANCE - INTERNATIONAL FINANCE Balance of...

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INTERNATIONAL FINANCE Balance of Payment (BOP): This is a statistical summary of all transactions between residence of one country including individuals, businesses and governmental units and the rest of the world usually during a given period of time usually a year. Like profit and loss statement, a nation's BOP records its sale to and purchases from all other nations and account for any differences between its sales (receipts) and purchases (expenditures). The BDP provides information about a nation’s imports and exports, domestic residents' earnings on assets located aboard, foreign earnings on domestic assets, gifts to and from foreign countries (including foreign aid), and official transactions by governments and central banks. BOP account record both debits and credits . A debit indicated by minus "-" sign and a credit is indicated by a "+" plus sign. Debit : Any transactions that either supplies the nation’s currency or creates a demand for foreign currency in the foreign exchange market (e.g., if Americans buy Japanese television sets). Credit : Any transaction that either supplies a foreign currency or creates a demand for the nation’s currency in the foreign exchange market (e.g., if Japanese buy U.S. television sets). The international transactions that occur, and are summarized in the BOP, can be grouped into three categories, or three categories, or three accounts: a) The current account b) The capital account c) The official reserve or financing account d) And statistical discrepancy 1) The Current Account: Includes all payments related to the purchases and sale of goods and services. Components of the account includes exports, imports, and net unilateral transfers aboard. Exports of Goods and Services : Americans exports goods (say, cars), they exports services (e.g., insurance, banking, transportation, and tourism) and they receive investment income on assets they own abroad. All three activities increase the demand for U.S. dollars at the same time as they supply of foreign currencies; thus, they are recorded as credits (+). Imports of Goods and Services: Americans imports goods and services, and foreigners receive income on assets they own in the U.S. These activities increase the demand for foreign currencies at the same time as they increase the supply of U.S. dollars to the foreign exchange market; thus they are recorded as debits (-). Foreign Exchange Market: The market in which currencies of different countries are exchanged. Visible or Merchandise Trade: This shows the imports and exports of good (tangible goods). Merchandise Trade Balance: The difference between the value of merchandise exports and the value of merchandise imports.
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Merchandise Trade Deficit: The situation where the value of merchandise exports is less than the value of merchandise imports. Merchandise Trade Surplus:
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INTERNATIONALFINANCE - INTERNATIONAL FINANCE Balance of...

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