If balance of trades found to be in State of balance, find the deficit in account of invisibles if balance of payments on capital account shows a surplus of 20,000 on account of borrowing from rest of the world??
Dear student,
Since Balance of Trade found to be in a state of balance
therefore, Exports of goods=import of goods
And we know, BOP is based on double-entry system, therefore it's debit side must be equal to credit side
ie total receipts=total payments
or total credit items (current and capital items)=total of debit items(current and capital items)
both capital account and current account balance each other. thus if there is a surplus in the capital account then there must be an equal deficit in current account and vise Versa
now, since there is the surplus in the capital account Rs 20000 (on credit side of BOP) on the account of borrowing from the rest of the world, therefore there must be deficit of Rs 20000 in the current account (ie the account of Invisibles)
Regards!!
Since Balance of Trade found to be in a state of balance
therefore, Exports of goods=import of goods
And we know, BOP is based on double-entry system, therefore it's debit side must be equal to credit side
ie total receipts=total payments
or total credit items (current and capital items)=total of debit items(current and capital items)
both capital account and current account balance each other. thus if there is a surplus in the capital account then there must be an equal deficit in current account and vise Versa
now, since there is the surplus in the capital account Rs 20000 (on credit side of BOP) on the account of borrowing from the rest of the world, therefore there must be deficit of Rs 20000 in the current account (ie the account of Invisibles)
Regards!!