Consider the following statements with respect to Balance of Payment:
1. It is considered as a balance sheet of any country.
2. It is considered a flow statement of any country.
3. It keeps records of all international economic transactions.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 and 3 only
(c) 1, 2 and 3
(d) 1 and 3 only
Explanation Statement 1 is not correct: Unlike a balance sheet, which shows a country's assets, liabilities, and equity at a specific point in time, the BoP tracks transactions over a period (e.g., a quarter or a year).
Statement 2 is correct: The balance of payments is considered a flow statement because it records all economic transactions between a country and the rest of the world, including imports, exports, and capital flows, over a specific period, not as a snapshot of assets and liabilities at a particular point in time.
Statement 3 is correct: The balance of payments (BoP) is a systematic record of all economic transactions between a country's residents and the rest of the world, including trade in goods and services, financial flows, and capital transfers.
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