BALANCE OF PAYMENT: This is the relationship between a country’s total payments to other countries and its total receipts from those countries. A country’s balance of payments account is divided into two parts viz:
- Current Account: This deals with payments and receipts for goods and services. It shows the income and expenditure on both visible and invisible trade.
- Capital Account: This deals with payments and receipts for services rendered to a country by another country. It shows the actual transfers of money from one country to the other through private (individual) and official (government) capital investments.