Bop example sentences

Under a fixed exchange rate system, such as the gold standard, adjustment to BoP surpluses or deficits cannot be brought about through changes in the exchange rate.The BoP records a country's transactions with the rest of the world.Now the RBI might decide to fix the exchange rate at a higher level – Rs 47 per dollar – to bridge part of the deficit in BoP.The result of this pricespecie- flow (precious metals were referred to as 'specie' in the eighteenth century) mechanism is normally to improve the BoP of the country losing gold, and worsen that of the country with the favourable trade balance, until equilibrium in international trade is re-established at relative prices that keep imports and exports in balance with no further net gold flow.Errors and Omissions constitute the third element in the BoP (apart from the current and capital accounts) which is the 'balancing item' reflecting our inability to record all international transactions accurately.Total credits in the BoP accounts are then equal to the supply of foreign exchange.There are two main accounts in the BoP – the current account and the capital account.The link between the balance of payments accounts and the transactions in the foreign exchange market is evident when we recognise that all expenditures by domestic residents on foreign goods, services and assets and all foreign transfer payments (debits in the BoP accounts) also represent demand for foreign exchange.The demand for dollars will rise sharply causing a BoP deficit.The question arose – would not a country lose all its stock of gold if it imported too much (and had a BoP deficit)? The mercantilist4 explanation was that unless the state intervened, through tariffs or quotas or subsidies, on exports, a country would lose its gold and that was considered one of the worst tragedies.The balance of payments (BoP) record the transactions in goods, services and assets between residents of a country with the rest of the world.The official reserve transactions are seen as the accommodating item in the BoP (all others being autonomous).Accommodating transactions (termed 'below the line' items), on the other hand, are determined by the net consequences of the autonomous items, that is, whether the BoP is in surplus or deficit.A change in exchange rates was to be permitted only in case of a 'fundamental disequilibrium' in a nation's BoP – which came to mean a chronic deficit in the BoP of sizeable proportions.These items are called 'above the line' items in the BoP.