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

The pragmatic aspect of the balance of payments (BOP) is manifested when, after adequate economic diagnosis, based on more or less accurate information, governments make economic policy decisions directly linked to trade and external finance. Also, pragmatism occurs when they execute fiscal, monetary or sectoral policy actions that may have an impact on the competitiveness of an economy in international markets. That is, the analysis of the balance of payments (BOP) can determine (or measure) the subsequent effect caused by some measure taken or economic event (internal or external). As, for example: the imposition of controls on short-term foreign capital flows, a variation of the customs tariff, the variation of relative prices, the promotion of pro-export measures, fluctuations in the prices of raw materials, a substantial variation in the exchange rate and / or the interest rate of money, an international financial crisis, etc. Likewise, the economic agents of the private sector -several exporters and importers of goods, services and resources- make economic decisions related to the external sector of a country’s economy. Then, the knowledge of basic concepts and instruments of the balance of payments (BOP) are also necessary for the best business decision making in an increasingly global economy.

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  1. 2018

    […] What is balance of payments? Explain its major components. Why is it useful to compute a country’s… IGNOUASSIGNMENTGURU The currency that is on the gold standard could be exchanged for an equal amount of gold at any time since the currency is essentially a promissory note for the precious metal. Defenders of the gold standard say that it gives real value to the currency instead of the imaginary value of the current currency. Detractors say that the gold standard is too rigid and restricts economic policy in times of financial instability. […]

  2. 2018

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  3. 2018

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  4. 2018

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