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What Are The Components Of Balance Of Payments Account?

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Components of Balance of Payments  Balance of Payments is generally grouped under the following heads  i) Current Account  ii) Capital Account  iii) Unilateral Payments Account  iv) Official Settlement Account.    Current Account    “The Current Account includes all transactions which give rise  to or use up national income.”  The Current Account consists of two major items, namely:  I) Merchandise exports and imports, and  ii) Invisible exports and imports.  Merchandise exports, i.e., the sale of goods abroad, are credit entries because all transactions giving rise to monetary claims on foreigners represent credits. On the other hand, merchandise imports , i.e., purchase of goods from abroad, are debit entries because all transactions giving rise to foreign money claims on the home country represent debits. Merchandise imports and exports form the most important international transaction of most of the countries .Invisible exports, i.e., sales of services, are credit entries and invisible imports, i.e. Purchases of services, are debit entries. Important invisible exports include the sale abroad of such services as transport, insurance, etc., foreign tourist expenditure abroad and income paid on loans and investments (by foreigners)in the home country form the important invisible entries on the debit side.    Capital Account    The Capital Account consists of short- terms and long-term capital transactions A capital outflow represents a debit and a capital inflow represents a credit. For instance, if an American firm invests Rs.100 million in India, this transaction will be represented as a debit in the US balance of payments and a credit in the balance of payments of India. The payment of interest on loans and dividend payments are recorded in the Current Account, since they are really payment s for the services of capital. As has already been mentioned above, the interest paid on loans given by foreigners of dividend on foreign investments in the home country are debits for the home country, while, on the other hand, the interest received on loans given abroad and dividends on investments abroad are credits.    Unilateral Transfers Account    Unilateral transfers is another terms for gifts. These unilateral transfers include private remittances, government grants ,disaster relief, etc. Unilateral payments received from abroad are credits and those made abroad are debits.    Official Settlements Accounts    Official reserves represent the holdings by the government or official agencies of the means of payment that are generally accepted for the settlement of international claims
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It comprise the following
1,current account
2,capital and financial account
3,unilateral transfer account
4,official reserve transaction account
Praisemore Mhlanga Profile
How can you use B.O.P to determine of forecast the likely direction of change of the external value of a country's currency?
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The 2 major component of B.O.P are
the term which comes in current a/c
and the terms which comes in capital a/c

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