Question

Explain the concept of balance of payment and why foreign exchange is important​

Answer 1

Explanation:

BOP statement can be used as an indicator to determine whether the country's currency value is appreciating or depreciating. BOP statement helps the Government to decide on fiscal and trade policies. It provides important information to analyze and understand the economic dealings of a country with other countries.

Answer 2

The demand for foreign exchange arises from the debit items in the balance of payments, whereas the supply of foreign exchange arises from credit items. ... There will be increase in the demand for foreign exchange relative to the supply thereof because more payments have to be made than receipt of payments from abroad.

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