What is the difference between balance of trade and balance of payments?

Answer 1

Balance of Trade is the accounting of goods and service imported and exported.

Balance of Payments is the accounting of money owed and loaned other nations.

Answer 2

It is the balance of all international transactions of a country. Credits (inflows) such as from exports and investments received are positive and debits (outflows) such as imports and investments paid out are negative. Give a look at the US CIA´s The World Fact Book at: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html I was not able to weblink CIA´s site to WikiAnswers; perhaps because it is https

Answer 3

Basis of Difference

Balance of Trade (BOT)

Balance of Payment (BOP)1. Definition

Balance of trade may be defined as difference between export and import of goods and services.

Balance of payment is flow of cash between domestic country and all other foreign countries. It includes not only import and export of goods and services but also includes financial capital transfer.2. Formula

BOT = Net Earning on

Export - Net payment for imports

BOP = BOT + (Net Earning

on foreign investment - payment made to foreign investors) + Cash

Transfer + Capital Account +or - Balancing Item

or

BOP = Current Account + Capital Account + or - Balancing item ( Errors and omissions)3. Favourable or

Unfavourable

If export is more than

import, at that time, BOT will be favourable. If import is more than export, at that time, BOT will be unfavourable.

Balance of Payment will be

favourable, if you have surplus in current account for paying your all

past loans in your capital account.

Balance of payment will be unfavourable, if you have current account deficit and you took more loan from foreigners. After this, you have to

pay high interest on extra loan and this will make your BOP

unfavourable.4. Solution of Unfavourable

Problem

To Buy goods and services

from domestic country.

To stop taking of loan

from foreign countries.

5. Factors

Following are main factors

which affect BOT

a) cost of production

b) availability of raw materials

c) Exchange rate

d) Prices of goods manufactured at homeFollowing are main factors

which affect BOP

a) Conditions of foreign lenders.

b) Economic policy of Govt.

c) all the factors of BOT

6. Meaning of Debit and

Credit

If you see RBI' Overall

balance of payment report, it shows debit and credit of current account.

Credit means total export of different goods and services and debit means total import of goods and services in current account.Credit means to receipt and earning both current and capital account and debit means total outflow of cash both current and capital account and difference between debit and credit will be net balance of payment.

Answer 4

it is good na dfavourable for an erconomy