Globalisation Of Trade: International Trade: Balance Of Trade And Balance Of Payments (Copy)
Cheat Sheet: 3.1.3 Balance of Trade and Balance of Payments
| Concept | Meaning | Formula | Example |
|---|---|---|---|
| Balance of Trade (BoT) | Difference between value of exports and imports of goods only | Exports – Imports (goods) | Exports = $50m, Imports = $40m → BoT = +$10m (surplus) |
| Balance of Payments (BoP) | Record of all financial transactions between a country and the rest of the world (goods, services, investment, transfers) | Credits – Debits | Includes exports/imports, tourism, remittances, foreign investment |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Key Differences
| Feature | Balance of Trade | Balance of Payments |
|---|---|---|
| Scope | Goods only | Goods, services, investments, transfers |
| Narrow/Broad | Narrow measure | Broad measure |
| Example | Importing oil vs. exporting rice | Exports + remittances + tourism + FDI inflows |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Commercial Activities Affecting BoT & BoP
| Activity | Effect |
|---|---|
| Increase in Exports | Improves BoT and BoP |
| Increase in Imports | Worsens BoT, may worsen BoP |
| Foreign Direct Investment (FDI) | Improves BoP by bringing in capital |
| Tourism & Services | Inflows improve BoP |
| Profit Repatriation by MNCs | Outflows worsen BoP |
| Remittances from Abroad | Improve BoP balance |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Summary
| Key Idea | Takeaway |
|---|---|
| BoT = goods trade balance only. | |
| BoP = complete financial transactions with rest of world. | |
| Commercial activities like exports, imports, investment, remittances, and MNCs directly influence both balances. |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course