Question

Highlight the features of balance of trade.

Answer 1

1. Balance of trade is statement showing the net effect of export and import of a country.
2. It records only transactions, relating to merchandise, i.e. goods transactions.
3. It does not record capital transactions.
4. It is part of current account of BOP.
5. It may be at favorable or unfavourable or in equilibrium state.
6. It is not true indicator of economic prosperity or economic relations of country. Unfavourable balance of trade can be converted into favorable balance of payment.