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What is the full form of BOP?
1. Balance of Payment
2. Balance of Process
3. Balance of Processes
4. Balance of Products
5. None of the above

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Correct Answer - Option 1 : Balance of Payment

The correct answer is Balance of Payment.

  • The balance of payments (BoP) records the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period typically a year
  •  There are two main accounts in the BoP – the current account and the capital account.
  • The current account records exports and imports in goods and services and transfer payments. 
  • When exports exceed imports, there is a trade surplus and when imports exceed exports there is a trade deficit. 
  • The balance of exports and imports of goods is referred to as the trade balance.
  • Adding trade in services and net transfers to the trade balance, we get the current account balance.
  • The capital account records all international purchases and sales of assets such as money, stocks, bonds, etc.
  • In any transaction resulting in a payment to foreigners is entered as a debit and is given a negative sign.
  • Any transaction resulting in a receipt from foreigners is entered as a credit and is given a positive sign.

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