Balance ò Payment

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Q1: Balance of payment: When a country trade with another countries, there are records of all that transaction known as payment of balance, the benefit of having such a record is to know how much money is spent on import and export in goods and services. BOP consist in: 1- Capital account: monitoring of the short term and long term transaction among the UK and the whole world in (saving and investment) with a surplus of 100 million in 2012 and it contains: * Direct investment: when an invest take a place outside the country (abroad) the record of transfer of ownership it’s called a direct investment with amount of 48.3 billion in 2012. * Portfolio investment: it’s all the investing in shares and bonds, and all the…show more content…
However, a sudden decrease happened in 2011 with (-) 12.8 billion. Moreover, in 2014 a huge decrease happened reached to (-) 27 billion. Q3.Exhchange rate is the value of one currency toward another. In case if the currency of pound for instant decrease (weaken), therefore, all their export of goods will become cheaper. On the other hand, if UK want to import from outside USA they have to pay more to import products and services. When the services and product of UK is cheaper than the United States, therefore, it will arm wrestle UK to increase export volume. Which will lead to have a surplus of international balance of payment. In return the other country which import goods from UK will focus on importing cheaper goods than exporting which will lead to a deficit to their international balance of payment. For example in 2011 the value of £1 = $1.65 which it means the value of pound decreased, which leads to import goods from UK really expansive and also traveling outside, with that the exporting was the best option for outside countries like US to buy a cheap goods from UK. Q4. There are 2 types of exchange rate
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