Define balance of payment. What does balance of trade account record? Julie took her family to Bali for a Christmas vacation. In which account would you record her transactions during her travel in Ba

QUESTION 11
Define balance of payment.
The balance of payments (BOP) is a systematic record of all economic transactions between residents of a country and residents of the rest of the world during a specific period, usually a year. It summarizes all international transactions to show the financial position of a country with the rest of the world.
$\boxed{\text{The balance of payments is a record of all economic transactions between a country and the rest of the world.}}$

QUESTION 12
What does balance of trade account record?
The balance of trade account records the value of a country's visible exports (goods sold to other countries) and visible imports (goods bought from other countries). It is the difference between the value of a country's merchandise exports and imports.
$\boxed{\text{The balance of trade account records the value of a country's exports and imports of goods.}}$

QUESTION 13
Julie took her family to Bali for a Christmas vacation. In which account would you record her transactions during her travel in Bali in Indonesia?
Julie's transactions for her vacation in Bali, which involve spending money on services like accommodation, food, and activities, would be recorded in the Services Account (also known as the invisible trade account) within the current account of the balance of payments.
$\boxed{\text{Services Account (or Invisible Trade Account)}}$

QUESTION 14
Differentiate between improving terms of trade and deteriorating terms of trade.

• Improving terms of trade occur when a country's export prices rise relative to its import prices. This means the country can buy more imports for a given amount of exports, leading to an increase in national income and purchasing power.
• Deteriorating terms of trade occur when a country's export prices fall relative to its import prices. This means the country has to export more to buy the same amount of imports, leading to a decrease in national income and purchasing power. $\boxed{\text{Improving terms of trade: Export prices rise relative to import prices.}}$ $\boxed{\text{Deteriorating terms of trade: Export prices fall relative to import prices.}}$

QUESTION 15
State if the following is an inflow or out flow.

I. BSP Fiji pays the dividends to Papua New Guinean shareholders.

• This represents money coming into Papua New Guinea. $\boxed{\text{Inflow}}$

II. Australian pilot is paid his monthly salary by Air Niugini.

• This represents money leaving Papua New Guinea to pay a foreign resident. $\boxed{\text{Outflow}}$

III. Jera exported her coffee direct to German.

• This represents money coming into Papua New Guinea from the sale of goods to a foreign country. $\boxed{\text{Inflow}}$

IV. Stephanie just bought a Japanese used car through the Internet.

• This represents money leaving Papua New Guinea to pay for an imported good. $\boxed{\text{Outflow}}$

V. OX & Palm just exported it product to Fiji.

• This represents money coming into Papua New Guinea from the sale of goods to a foreign country. $\boxed{\text{Inflow}}$