Balance of Payments and Balance of Trade

Balance of Payment
The term Balance of Payment refers to a complete and comprehensive account of a country's entire commercial transactions with rest of the world. BoP is the figure showing the balance between a nation's earning from abroad and its spending abroad. If the value of imports exceeds that of exports, a deficit balance results. If export are worth more than imports, there is a favorable Balance of Payment. Balance of Payment is the most important factor in determining the exchange rate of country's currency.


Balance of Trade

The term Balance of Trade refers to the difference of the visible exports and imports of the countries in trade with each other. If the export are more, it is called favorable balance of trade and if the imports are more than the exports, it is called unfavorable Balance of Trade. Usually developed countries have favorable Balance of Trade and developing countries have unfavorable Balance of Trade 

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