Explain the components of the current account of the Balance of Paymen

1.	Explain the components of the current account of the Balance of Payment.
Answer» Components of Current Account of the Balance of Payment: The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports – payments for imports), factor income (earnings on foreign investments-payment made to foreign investors) and cash transfers. Entries under Current account might include: Trade – buying and selling of goods and services Exports – a credit entry Imports – a debit entry Trade balance – the sum of Exports and Imports Factor income – repayments and dividends from loans and investments Factor earnings – a credit entry Factor payments – a debit entry Factor income balance – the sum of earnings and payments.

Explain the components of the current account of the Balance of Payment.

Answer»

Components of Current Account of the Balance of Payment:

The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit.

It is the sum of the balance of trade (net earnings on exports – payments for imports), factor income (earnings on foreign investments-payment made to foreign investors) and cash transfers.

Entries under Current account might include:

Trade – buying and selling of goods and services

Exports – a credit entry

Imports – a debit entry

Trade balance – the sum of Exports and Imports

Factor income – repayments and dividends from loans and investments

Factor earnings – a credit entry

Factor payments – a debit entry

Factor income balance – the sum of earnings and payments.

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