NCERT Class 12 Macroeconomics: Chapter 6 - Open Economy Macroeconomics | CBSE | English - BoP Part 1

Exam preparation @ https://www.doorsteptutor.com/Exams/ Masters or Postgraduate Level Science, Social Studies and Humanities @    / testprep   Hindi lectures by Examrace @    / examracehindi   Videos from nursery to Class 5 @    / funprof   NEET, JEE, BITSAT, KVPY, Class 11-12 Science (Physics, Chemistry, Biology and Mathematics) @    / doorsteptutor   Also visit Lectures, Notes, Questions @ https://www.doorsteptutor.com/ ICSE, NCERT, NIOS @ https://www.flexiprep.com/ IGCSE, A & AS Level @ https://www.examtestprep.com/ Current Account is the record of trade in goods and services and transfer Payments. Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. They could be given by the government or by private citizens living abroad. Current Account is in balance when receipts on current account are equal to the payments on the current account. A surplus current account means that the nation is a lender to other countries and a deficit current account means that the nation is a borrower from other countries Balance on Current Account has two components: • Balance of Trade or Trade Balance • Balance on Invisibles Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. It is also known as Trade Balance. Net Invisibles is the difference between the value of exports and value of imports of invisibles of a country in a given period of time. Invisibles include services, transfers and flows of income that take place between different countries. Services trade includes both factor and non-factor income. Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc. Capital Account records all international transactions of assets. An asset is any one of the forms in which wealth can be held, for example: money, stocks, bonds, Government debt, etc. Purchase of assets is a debit item on the capital account. If an Indian buys a UK Car Company, it enters capital account transactions as a debit item (as foreign exchange is flowing out of India). On the other hand, sale of assets like sale of share of an Indian company to a Chinese customer is a credit item on the capital account. Classifies the items which are a part of capital account transactions. These items are Foreign Direct Investments (FDIs), Foreign Institutional Investments (FIIs), external borrowings and assistance. Surplus in capital account arises when capital inflows are greater than capital outflows, whereas deficit in capital account arises when capital inflows are lesser than capital outflows #examrace #upsc #ugcnet