Explain the meaning of the following: (i) Balance of trade (ii) Balance of payment. – NABTEB QUESTION

(i) Balance of trade is the difference between export and import of tangible goods also known as visible items of foreign trade for a country within a given period. This balance may be either favorable or unfavorable. Favorable balance of trade occurs when export of visible items are greater or exceed the import of the visible items. Unfavourable balance of trade occurs when export of tangible goods is less than the import of tangible or visible items.

(ii) Balance of payment is the difference between the total amount of export and import of both visible and invisible goods and items within a given period for a country. This balance may be favorable or unfavorable. Favorable balance of payment occurs when total receipts are more than total payment. Unfavorable balance of payment occurs when total receipt are less than total payment. It is also called adverse balance of payment