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Question
Highlight the features of balance of trade.
Solution
- Balance of trade is statement showing the net effect of export and import of a country.
- It records only transactions, relating to merchandise, i.e. goods transactions.
- It does not record capital transactions.
- It is part of current account of BOP.
- It may be at favorable or unfavourable or in equilibrium state.
- 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.
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