12TH GRADE
Macroeconomics
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Notes :- BALANCE OF PAYMENTS
Introduction: What is balance of payments? Explain its components.
According to kindle berger
It refers to systematic record of all economics transactions between residents of one country to
another countries
•It is statement of all receipts and payments which involve transfer of titles or ownership of
assets
° All inflows are taken as positive items and recorded in the credit side of BOP
° All outflows are taken as negative items and recorded in the debit side of BOP
IT HAS FOLLOWING ACCOUNTS:-
● CURRENT A/C
● CAPITAL A/C
● ERRORS & OMISSIONS OR OFFICIAL RESERVE A/C
● Define CURRENT ACCOUNT and it's components.
- It involves all such transactions which are related with the exports and imports
of goods and services and unilateral transfers between residents of one country
with respect to the other .
IT HAS FOLLOWING COMPONENTS
, ● VISIBLE TRADE:- it refers to the difference between export and import of goods and
services b/w residents of one country to the other .
NET VISIBLE TRADE= { EXPORT OF GOODS - IMPORT OF GOODS}
~ it is also called merchantise trade or net visible trade or balance of trade
~ IT include only those transactions which can be seen ,touched ,or measured for ex- export of
machinery ,cement ,or import of jewellery,food items etc.
● INVISIBLE TRADE :- It include all economics transactions related to services b/w
residents of one country with respect to the other like banking services, healthcare
services
~ IT include those transactions which can't be seen or touched
~NET INVISIBLE TRADE = { EXPORT OF SERVICES - IMPORT OF SERVICES }
● UNILATERAL TRANSFERS :- it includes one sided transaction like gifts and
grants ,relief fund money b/w resident of one country to the other.
~ NET UNILATERAL TRANSFERS= { UNILATERAL TRANSFERS RECEIVED -
UNILATERAL TRANSFERS PAID }
# NET CURRENT ACCOUNT = NET VISIBLE TRADE + NET INVISIBLE TRADE + UNILATERAL
TRANSFERS .
Q. Define CAPITAL ACCOUNT and explain its components.
~ it involves all such transactions which affect asset and liabilities status of resident of
one country with respect to the other .
~ IT HAS FOLLOWING COMPONENTS
● FOREIGN DIRECT INVESTIGATION (FDI) :- It refers to the purchase of assets of
resident of one country with respect to the other.
~ it allows complete control over the assets by the owner of the assets.
For ex:- purchase of reliance by foreigners or purchase of KFC by Indians
Macroeconomics
___
Notes :- BALANCE OF PAYMENTS
Introduction: What is balance of payments? Explain its components.
According to kindle berger
It refers to systematic record of all economics transactions between residents of one country to
another countries
•It is statement of all receipts and payments which involve transfer of titles or ownership of
assets
° All inflows are taken as positive items and recorded in the credit side of BOP
° All outflows are taken as negative items and recorded in the debit side of BOP
IT HAS FOLLOWING ACCOUNTS:-
● CURRENT A/C
● CAPITAL A/C
● ERRORS & OMISSIONS OR OFFICIAL RESERVE A/C
● Define CURRENT ACCOUNT and it's components.
- It involves all such transactions which are related with the exports and imports
of goods and services and unilateral transfers between residents of one country
with respect to the other .
IT HAS FOLLOWING COMPONENTS
, ● VISIBLE TRADE:- it refers to the difference between export and import of goods and
services b/w residents of one country to the other .
NET VISIBLE TRADE= { EXPORT OF GOODS - IMPORT OF GOODS}
~ it is also called merchantise trade or net visible trade or balance of trade
~ IT include only those transactions which can be seen ,touched ,or measured for ex- export of
machinery ,cement ,or import of jewellery,food items etc.
● INVISIBLE TRADE :- It include all economics transactions related to services b/w
residents of one country with respect to the other like banking services, healthcare
services
~ IT include those transactions which can't be seen or touched
~NET INVISIBLE TRADE = { EXPORT OF SERVICES - IMPORT OF SERVICES }
● UNILATERAL TRANSFERS :- it includes one sided transaction like gifts and
grants ,relief fund money b/w resident of one country to the other.
~ NET UNILATERAL TRANSFERS= { UNILATERAL TRANSFERS RECEIVED -
UNILATERAL TRANSFERS PAID }
# NET CURRENT ACCOUNT = NET VISIBLE TRADE + NET INVISIBLE TRADE + UNILATERAL
TRANSFERS .
Q. Define CAPITAL ACCOUNT and explain its components.
~ it involves all such transactions which affect asset and liabilities status of resident of
one country with respect to the other .
~ IT HAS FOLLOWING COMPONENTS
● FOREIGN DIRECT INVESTIGATION (FDI) :- It refers to the purchase of assets of
resident of one country with respect to the other.
~ it allows complete control over the assets by the owner of the assets.
For ex:- purchase of reliance by foreigners or purchase of KFC by Indians
