Macroeconomics
Moneyenteringthecountryiscategorizedascredititems,recordedwithapositivesign(+)ontheBOP. Conversely,moneyleavingthecountryisclassifedasdebititems,recordedwithanegativesign(−).This meansthat anytransactionclassifedasanexportisrecordedasacredit ,whereas anytransaction deemed an import is recorded as a debit . Thebalanceofpaymentsisdividedintotwomainaccountseachincludingcreditanddebitentries:the current account and the capital and fnancial account. Current Account The current account (CA) on the balance of payments records international transactions that do not create a liability for a country because they donotrequireanyrepaymentofmoney.Therearethree main components of the current account: 1. NetExports: ThenetexportscomponentoftheCArecordsalltransactionsrelatedtotheexport and import of goods and services, and is therefore divided into two categories: a. Trade in Goods: When tangible products, referred to as goods, such as cars, food, agricultural products and so on, are sold to other countries, this transaction is considered an export recorded as a credit (+) on the CA. Conversely, whengoodsare purchasedfromothercountries,thistransactionisanimportrecordedasadebitonthe CA (−). The total trade in goods,alsoreferredtoasthevisibletradebalance,isthedifference between the exports and the imports of goods: Total trade in goods = exports of goods − imports of goods b. Trade in Services: When services, or intangible things like tourism, banking, IT, and
accounting services, are sold to other countries, the export is recorded as a credit item (+) on the CA. Conversely, when services are purchased from other countries, the import is recorded as a debit item on the CA. Thetotaltradeinservices,alsoreferredto as the invisible trade balance, is the difference between the exports and the imports of services.
Total trade in services = exports of services − imports of services
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