Q. With respect to Balance of Trade, which of the following statement is/are not correct?
1. Balance of trade is the difference between the value of a country’s imports and exports for a given period.
2. The Balance of Payment (BOP) combines only public investments to find out the money inflow and outflow in an economy over a specific period.
3. Positive Balance of Payment (BOP) indicates deficit.
Select the correct answer using the code given below:

[A] 1 only

[B] 1 and 3 only

[C] 1 and 2 only

[D] 2 and 3 only

Answer: D
Notes:

Explanation: Balance of Trade

The term ‘trade’ refers to buying and selling of goods. However, when it is performed on an international scale, it is called imports and exports. Balance of Trade (BOT) mentions the import and exports made by a nation’s economy within a specific year. BOT only records tangible items.

Balance of trade (BOT) is the difference between the value of a country’s imports and exports for a given period and is the largest component of a country’s balance of payments (BOP).

Balance of Payment is a combination of accounts that shows the commercial transactions concluded by a country within a specific period with other countries. These accounts reflect every monetary transaction, i.e. commodities, services, and incomes during that period.

The Balance of Payment (BOP) combines every private and public investment to find out the money inflow and outflow in an economy over a specific period.

The ideal status of BOP should be zero, which indicates that the money coming into the country is equal to the money going out of the country. However, this situation is highly unlikely. Therefore, if it is negative, then it indicates deficit, and if positive, it means a surplus.

Source: ForumIAS