BALANCE OF PAYMENTS (B.O.P)

CONTENT

1. Introduction to Balance of Payments (B.O.P)
2. Roles of Money in International Trade
3. Terms of Trade
4. Balance of Trade
5. Balance of Payments
6. Commercial Policy in International Trade
7. Tariff or Restriction on Trade
8. Exchange Rates
9. Devaluation

Introduction to Balance of Payments (B.O.P)

International trade is trade between two or more countries. Foreign trade is made possible as a result of international specialization. Money plays prominent roles in international trade.

Roles of Money in International Trade

1. It is a medium of exchange of commodities in international trade: – The exchange of goods and services among the residents and governments of various countries across international boundaries is done by money
2. In international trade, trade credits are sometimes given and payments are made later.
3. Surplus foreign exchange from international trade is kept as reserves in the form of gold or international currency such as dollar.
4. It serves as unit of account because balance of trade and payment accounts are recorded in monetary terms.