2. What do you mean by Balance of Payments? Explain
the relationship between the balance of payments and the
exchange rates of a country, giving suitable illustrations
in support of your answer.
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Answer Posted / aarti
The record of money payments between one country and other
countries. Balance of payments is more inclusive than
balance of trade because balance of payments comprises
foreign investment, loans, and other cash flows as well as
payments for goods and services. A country's balance of
payments has a significant effect on its currency value in
relation to other currencies. It is of particular interest
to individuals who own foreign investments or who own
domestic investments in companies dependent upon exports.
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