Write all the Differences between balance of trade and balance of payment in tabular form?

Answer 1

In order to examine a country's position in international trade, it is useful to

consult two of the most frequently used statistics, the balance of trade and the

balance of payments. When you hear on the news about the U.S. "trade

balance," what you are usually hearing about is the merchandise trade

balance, which is the difference between a nation's exports and imports of

merchandise. A "favorable" merchandise balance of trade, or trade surplus,

occurs when a country's exports exceed its imports. A "negative" balance of

trade, or trade deficit, occurs when a country's imports exceed its exports.

From the mid-1970s, throughout the 1980s and into the 1990s, the United

States has run persistent trade deficits. Economists disagree as to the effects

this has had on the economy, but it is certain that these deficits allowed

foreigners to accumulate U.S. dollars earned in payment for products that

Americans imported The balance of trade, however, is not the whole picture; it includes only

purchases and sales of merchandise. The complete summary of all economic

transactions between a country and the rest of the world--involving transfers

of merchandise, services, financial assets and tourism--is called the balance

of payments.

Simply, any transaction that results in money flowing into the country is a

balance of payments credit, and anything that draws money out of the country

is a balance of payments debit.

Balance of payments deficits, where the amount of money leaving the country

is greater than the amount flowing in, need to be financed; extra money has to

come from somewhere. Usually, payments deficits are financed by borrowing

money from overseas.

The balance of payments for a country is separated into two main accounts:

the current account and the capital account. The current account records

sales and purchases of goods, services and interest payments. The entire

merchandise trade balance is contained in the current account. The capital

account deals with investment items, like whole companies, stocks, bonds,

bank accounts, real estate and factories. Thus, if you bought a parachute from

a factory in Germany, your purchase would be recorded in the current

account. But if you bought the entire parachute factory, your purchase would

be in the capital account.

The balance of payments is influenced by many factors, including the

financial and economic climate of other countries. For example, if other

countries want the services of U.S. doctors, bankers, lawyers, Accountants,

engineers, entertainers and other service-providers, that demand will play a

significant role in the U.S. balance of payments. Large amounts of money flow

between nations in payment for such services, even if no merchandise is

exchanged. In 1991, service exports accounted for over one-quarter of total

U.S. export