The Balance of Payment can been divided into 3 parts. Is this statement true of false?

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justaguide eNotes educator| Certified Educator

Balance of payment is an accounting statement that includes all monetary transactions between a nation and the rest of the World. It can be divided into three parts. Your statement is true.

The three parts that balance of payment is generally divided into are:

Current account: this includes all funds that move in and out of the nation when goods and services are exported and imported. It also includes some categories of income from assets in other nations, and cross border transfer of funds as gifts.

Capital account: this is the net foreign direct investment and the flow of funds when there are transactions in securities in the nation by foreign entities and when those living in the nation transact in securities with the rest of the World.

A third part of the balance of payment is the change in foreign exchange reserves. This is largely influenced by the capital account and the current account.