Question

State the relationship between BOP and national economy.
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Answer 1

Answer:

There is a complete and consistent relationship between National economy and Balance of Payments (BOP). This is because BOP, along with International investment positions form as important and integral part of the National Accounts.

Although they are similar in concept and classification, the two systems may differ in the extent of cross-classifications.

BOP and National Accounts are useful for identifying resident producers and consumers. They invoke identical concepts of economic territory and economic interest. Also, they adopt identical concepts for valuating transactions and for accrual accounting.

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