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Balance of Payment
Balance of Payment
It is an important concept used in International trade. BOT is the balance of value of goods exported and value of goods imported. BOT=Vx-Vm Where , Vx= value of goods exported & Vm= value of goods imported
If Vx is 250 crores and Vm is 200 crores,find out BOT. BOT=Vx-Vm BOT=250-200 BOT=50 crores If a countrys BOT is (-) 50 crores & value of Import of goods is Rs. 100 crores.How much will be the value of exports of goods? BOT=Vx-Vm (-)50=Vx-100 (-)50+100=Vx 50=Vx.
Favorable BOT: the value of exports of goods > value of import of goods. Unfavorable BOT: value of exports of goods < Value of import of goods. *Equilibrium in BOT: value of goods exported = Value of goods imported.