Question

Distinguish between Balance of Payment and Balance of Trade.

Hint:

Remember: Balance of Trade deals only with goods, while Balance of Payment includes both goods and services, along with capital and transfers. BoT is just a subset of the broader BoP.

Answer 1

The difference between Balance of Payment (BoP) and Balance of Trade (BoT) is explained as follows: 

Balance of Payment (BoP)	Balance of Trade (BoT)
BoP is a comprehensive record of all economic transactions between a country and the rest of the world during a given period (usually one year).	BoT is a part of the BoP and records only the visible trade, i.e., exports and imports of goods.
It includes visible, invisible, and capital transfers such as services, investments, remittances, etc.	It includes only visible items like export and import of goods.
BoP consists of two main accounts: the Current Account and the Capital Account.	BoT is a part of the Current Account.
BoP may be balanced, in surplus, or deficit depending on the total of all international transactions.	BoT shows surplus when exports > imports and deficit when imports > exports.
BoP is a broader concept and reflects the overall economic position of the country in the global market.	BoT is a narrower concept and indicates only merchandise trade performance.