Q.
a) Describe the difference between the balance of payments and the balance of trade. (10 marks)
b) Explain the difference between macroeconomics and microeconomics. (10 marks)
(20 marks, 2018 Q2)
A.
a) Balance of payment vs balance of trade
The balance of payments (BOP) records financial transactions made between consumers, businesses and the government in one country with others
BALANCE OF PAYMENTS: The balance of payments accounts of a country record the payments and receipts of the residents of the country in their transactions with residents of other countries. If all transactions are included, the payments and receipts of each country are, and must be, equal. Any apparent inequality simply leaves one country acquiring assets in the others.
The balance of trade (a.k.a. current account) is included in the balance of payments.
BALANCE OF TRADE: The difference between the value of goods and services exported out of a country and the value of goods and services imported into the country. The balance of trade is the official term for net exports that makes up the balance of payments. The balance of trade can be a "favorable" surplus (exports exceed imports) or an "unfavorable" deficit (imports exceed exports). The official balance of trade is separated into the balance of merchandise trade for tangible goods and the balance of services.
A balance of trade surplus is most favorable to domestic producers responsible for the exports. However, this is also likely to be unfavorable to domestic consumers of the exports who pay higher prices.
Alternatively, a balance of trade deficit is most unfavorable to domestic producers in competition with the imports, but it can also be favorable to domestic consumers of the exports who pay lower prices.
Ref:
Dhaneswar Behera, Quora at
https://www.quora.com/What-is-the-difference-between-balance-of-trade-and-balance-of-payments
b) Macroeconomics versus microeconomics
Ref:
Earlier posts.