(a) Define Balance of Payments (BoP) Account. (b) Differentiate between Balance of Trade and Balance of Current Account.

Question

Accepted Answer

(a) **Balance of Payments (BoP) Account:** An accounting statement that provides a systematic record of all economic transactions between residents of a country and the rest of the world in a given period of time.

(b) **Difference between Balance of Trade and Balance of Current Account:**

| Basis | Balance of Trade | Balance of Current Account |
|-------|------------------|---------------------------|
| **Components** | Only visible items (goods) | Visible items + Invisible items + Unilateral transfers |
| **Scope** | Narrower concept | Wider concept, includes BOT |
| **Records** | Only merchandise trade | All transactions affecting income, output, employment |
| **Balance** | Trade surplus or deficit | Current account surplus or deficit |

**BOT = Exports of goods - Imports of goods**
**Current Account Balance = Net exports + Net services + Net unilateral transfers**