What is balance of payments? Explain its major components. Why is it useful to compute a country’s balance of payments?

Explain its major components. –

The Major Components Of The Balance Of Payments (BOP)

The balance of payments (BOP) consists of two main components:

1 The Balance of Current Transactions – represents the real flows in the economy. Includes merchandise imports and exports, as well as income and payments for services rendered abroad.

Its components are divided into:

  • Goods: all real estate furniture whose capacity is transferred between residents and foreigners. The distribution services related to the goods are also classified as merchandise between the customs border of the economy that exports them.
  • Shipments: includes freight, insurance and other distribution services provided by residents of the country in relation to goods and almost all other personal property acquired by non-residents. Non-residents in relation to merchandise and other movable property.
  • Shipments: includes services not classified in other items lent by one economy to another as a result of the operation of means of transport, plus goods and services acquired from one economy for another for consumption of means of transport in the course of its exploitation.
  • Travel: includes the goods and services that people defined as “travelers” acquire in an economy for their own use during their stay in it. International passenger transport is comprised of passenger services included in other transports. We found the following categories of travelers for business reasons, students, hikers, other travelers.
  • Investment income: includes the income obtained from the ownership of financial assets abroad. The most common types of investment income are dividends and interest. Dividends are understood as dividends in shares and shares distributed with gratification and the distribution of profits proportional to the participation in capital, cooperatives and public companies. Interest is defined as income accruing from “loans” and debt securities, that is, from financial securities such as bank deposits, bills, bonds, promissory notes and commercial advances.
  • Direct investment income; the components that appear under this heading include the income that the direct investor receives from the ownership of the direct investment capital. The second component includes all the profits of branches and other companies distributed to the direct investor.

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  1. 2018

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