CA Foundation Exam > CA Foundation Videos > Business Economics for CA Foundation > Balance of Payment
Balance of Payment Video Lecture | Business Economics for CA Foundation
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FAQs on Balance of Payment Video Lecture - Business Economics for CA Foundation
| 1. What is the meaning of Balance of Payment? |  |
Ans. Balance of Payment refers to a record of all economic transactions made between individuals, businesses, and the government of a country with other countries during a specific time period. It includes the trade balance, capital flows, and financial transfers between the domestic economy and the rest of the world.
| 2. What are the components of Balance of Payment? | |
Ans. The components of Balance of Payment include:
a) Current Account: It records the transactions related to trade in goods and services, income from abroad, and unilateral transfers.
b) Capital Account: It records the transactions related to the purchase and sale of non-financial assets.
c) Financial Account: It records the transactions related to the purchase and sale of financial assets, including direct investment, portfolio investment, and reserve assets.
| 3. How does a surplus in the Balance of Payment current account affect the exchange rate? | |
Ans. A surplus in the Balance of Payment current account indicates that a country is exporting more goods and services than it is importing. This leads to an increase in the demand for the country's currency, as foreigners need to buy the currency to pay for the exported goods and services. As a result, the exchange rate of the country's currency appreciates, making imports cheaper and exports relatively more expensive.
| 4. What are the consequences of a deficit in the Balance of Payment current account? | |
Ans. A deficit in the Balance of Payment current account means that a country is importing more goods and services than it is exporting. This leads to an increase in the supply of the country's currency in the foreign exchange market, causing its value to depreciate. Consequently, imports become more expensive, while exports become relatively cheaper, which can help to reduce the current account deficit over time.
| 5. How does the Balance of Payment affect a country's economy? | |
Ans. The Balance of Payment provides valuable information about a country's economic transactions with the rest of the world. It helps policymakers and economists assess the overall health of the economy, identify trends in international trade, and evaluate the sustainability of a country's external position. An imbalance in the Balance of Payment can have various implications for the economy, such as affecting exchange rates, influencing interest rates, impacting employment levels, and affecting the overall economic growth and stability of the country.
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Dec 20, 2024 Last updated |
Video Description: Balance of Payment for CA Foundation 2024 is part of Business Economics for CA Foundation preparation.
The notes and questions for Balance of Payment have been prepared according to the CA Foundation exam syllabus.
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Video Lecture & Questions for Balance of Payment Video Lecture | Business Economics for CA Foundation - CA Foundation full syllabus preparation | Free video for CA Foundation exam to prepare for Business Economics for CA Foundation.
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