Current Account of Balance of Payments (BOP)

The balance of payments (BOP) is a statement of all transactions made between entities in one country and the rest of the world over a defined period. It consists of two main components: the current account and the capital account. The current account is a record of all transactions concerning trade in goods and services, income, and current transfers.

Exports and Imports of Goods

The current account records the exports and imports of goods, which is the difference between the value of exports and the value of imports. This is also known as the trade balance. If a country exports more than it imports, it has a surplus in its current account, and if it imports more than it exports, it has a deficit.

For example, if a country exports goods worth $100 billion and imports goods worth $80 billion, it has a surplus of $20 billion in its current account. On the other hand, if a country exports goods worth $80 billion and imports goods worth $100 billion, it has a deficit of $20 billion in its current account.

The trade balance is an essential component of the current account as it reflects a country's competitiveness in the global market and its ability to generate income through exports.

Other Components of Current Account

Apart from the exports and imports of goods, the current account also includes the following components:

- Services: This includes trade in services such as transportation, tourism, and financial services.
- Income: This includes income earned by residents of a country from their investments in foreign countries and income earned by foreigners from their investments in the country.
- Current Transfers: This includes transfers of money between countries that do not involve the exchange of goods or services, such as remittances and foreign aid.

Conclusion

In conclusion, the correct answer to the given question is option 'B,' i.e., exports and imports of goods. It is an essential component of the current account of the balance of payments, reflecting a country's trade balance and its competitiveness in the global market.