Disadvantages Of Balance Of Payment

A balance of payment is a statement that summarizes an economy’s transaction with the rest of the world for a specified time period. A country’s balance of payments tells you whether it saves enough to pay for its imports. A balance of payment deficit is defined as a situation in which the imports of goods and services exceeds the exports of goods and services. Balance of payments helps economist and analyst understand the strength of a country’s economy in relation to other countries. Balance of payments Surplus is the amount by which the money coming into the country is more than the money going out in a particular period of time. (X=M)

Balance of Trade is the difference between a country’s imports and exports for a given time period. The

Transfers of possession of fixed assets.

2. Transfers of funds linked to acquisition or disposal of fixed assets.

Current assets are classified into two main groups- general government and other sectors:

General Government transfers include:

1. Cash or kind backed by international cooperation between governments of different economies.

2. Cash transfers between governments for financing current expenditures.

3. Current tax on income and wealth and other transfers such as social security.

Other Sectors transfers include:

1. Transfers in cash and kind for disaster relief

2. Regular contributions to charities, religious and scientific organizations.

A balance sheet should always balance. Balance sheet is based on the fact that assets will equal liabilities and equity every time. Balancing items is an accounting concept found by deducting the total value of the entries on one side of an account from the total value of entries on the other side. The assets on the balance sheet contains valuable things that a company owns or will get in the future CSO statistical release, 27 October 2017, 11am

Foreign Direct Investment

2016

€ million 2015 2016

Foreign Direct Investment

Flows - Abroad 151,776 26,563

Flows - In Ireland 194,567

Reserve are profits that have been appropriated for particular purpose, they are sometimes set up to purchase fixed assets. A capital is a type of account on a city’s or corporation’s balance sheet that is reserved for a long-term capital investment.

Problems Caused By Current Account Deficit

1. Lower aggregate demand- the biggest component of a current account is the trade balance, so if a country has current account deficit then they probably have a negative trade balance.

2. A current account deficit may imply that the government is replying on consumer spending, and are becoming uncompetitive.

3. A balance of payments deficit may cause a loss of confidence by foreign investors. Therefore, there is a risk, which may cause investors to remove investments causing a huge fall in value of the country’s currency.

Policies that can address long term current account involves:

1. Currency Weakness- Depreciation in exchange rate might make exports more competitive and become cheaper to foreigners, which will increase demand for exports. This could also cause higher economic causing an increase in aggregate demand.

2. Income Leakage – This is the situation where capital or income leaves an economy rather than remaining within. This also refers to the outflow from circular flow of