Ch. 10

• Balance of trade refers to the difference between the value of a country's exports and imports for a given period
• Balance of trade includes the value of imports and exports of visible goods (merchandise) and invisible goods (services)
• Components considered in constructing a country's BOP

  • Receipts of a country
  • Payments of a country
  • Payment made for import of goods and services
  • Income earned through selling goods and providing services abroad (exports)
  • Interests, profits, dividends received from foreign countries
  • Interests, profits, dividends paid to foreign countries
  • Unilateral receipts (gifts/donations received from foreign countries)
  • Unilateral payments (gifts/donations given to foreign countries)
  • Short-term, medium-term, and long-term lending
  • Short-term, medium-term, and long-term borrowing
• Ellsworth: 'Balance of payments is a summary statement of all the transactions of a country during a given period, usually a year'
• Samuelson: 'If export value is greater than the import value, it is called a trade surplus. If import value is greater than export value, then it is called a trade deficit. Trade surplus: Export value > Import value, Trade deficit: Import value > Export value'
• Walter Krouse: 'The balance of payments of a country is a systematic record of all economic transactions completed between its residents and the rest of the world during a given period of time, usually a year'
• Balance of payments includes the value of exchange of goods and services among citizens, businessmen, firms, government, etc.
• Bentham: 'Balance of trade of a country is the relation over a period between the values of her exports and imports of physical goods'
• Balance of payments is a systematic record of all international transactions between the residents of one country and the rest of the world