Which of the following statements is true of the difference between the balance of payments and the balance of trade?
A) The balance of payments includes the balance of trade, but it also includes other financial flows such as foreign borrowing and lending.
B) The balance of trade is the sum of the balance of payments and other financial flows such as foreign borrowing and lending.
C) The balance of trade considers only the two nations participating in a transaction, while the balance of trade includes all the exports and imports of a nation.
D) The balance of trade includes only exports and imports of goods, while the balance of payments includes exports and imports of both goods and services.

Question

Quizplus · Accepted Answer

The balance of payments includes the balance of trade, but it also includes other financial flows such as foreign borrowing and lending. The balance of trade only considers the exports and imports of goods, while the balance of payments includes exports and imports of both goods and services as well as other financial flows such as foreign aid, investments, and remittances. Therefore, answer (A) is correct. Answers (B), (C), and (D) are incorrect because they either do not accurately describe the difference or are too narrow in their scope.

Which of the Following Statements Is True of the Difference