BOP is made up of two majors which are current and financial accounts. The current account determines the flow of goods, services, investments, and payment transfers in and out of BOP. It has four major constitutes, which are trade in goods, services, investment earnings, and net transfers. However, basing on the other, Financial account determines the financial usage and general earnings of a given country. Therefore, financial accounts can be said to be a type of account that focuses most on monetary assets. In the current account, all deficits, surplus, debt forgiveness, transfer of ownership, and gift and inheritance taxes, among others, are recorded. However, for the financial account, it is split into two sections, which are the domestic ownership of foreign resources and the foreign possession of domestic remedies. It thus deals with money that is related to foreign accounts and private investments such as businesses (Segal, 2019) . In the case of China and the US as an example, whereby the US is running a current account deficit, a surplus will arise on its financial account. For instance, the US buys mobile phones from China; the US current account will deficit. Also, if China spends this foreign cash on purchasing ammunition, the US financial account will have a surplus. This shows there is a flow of money from the US to China and vice versa throughout the entire financial account (Pettinger, 2020) .
In economic indicators, financial accounting as a balance of payment plays an important role. Firstly, there is an evaluation of transactions of all goods and services that have been exported and imported over a given period. This ensures that no losses are incurred in terms of the overpayment of a good or service. It also enables the government to evaluate the potentiality of a given industry's export growth and thus comes up with a way of supporting the growth. It also allows the government to identify the country's economic position and therefore work out on planning expansion and allocation of funds to foster it. Besides, it provides the government with a wide view of various range of both import and export tariffs; thus, the government will be able to take measures that will aim at increasing and decreasing taxes. The aim of this will be to discourage importation and thus promote exportation to increase the countries self-dependency. Lastly, based on the Financial account's plan, if there is deprivation in a particular sector of the economy that is productive, BOP will be forced to let the government direct funds to the deteriorating sector to boost it up.
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Connection betwixt balance of payment framework and that of exchange rates can be compared with regard to variation in the exchange rate that leads to a change in the balance of payment. Variations in exchange rates will only influence the balance of payments always. However, changes in exchange rates lead to alterations in local costs and demand and supply of funds in the region. As a result, there will a decline in exchange rates since local prices cannot be satisfied with the available funds within the region. This will result in the need for foreign money to be fetched in thus creating a surplus in the balance of payments. The vice versa is also true. When exchange rates gain value, local prices will be affected, whereby the flow of money within the region will reduce. The funds will need to be flown out so as the balance of payments may incur a deficit. However, exchange rates affect the balance of payments only when there is no change in net wealth and other variables of the economy. As a result, the above shows that there exists a direct correlation between the balance of payments and the exchange rate.
The gold standard is a monetary form whereby a given countries currency has a valuation that is directly linked to gold. A country that emulates the use of gold standards sets out a constant price for gold, thus making it buy and sell gold at that constant price. The constant price is meant to evaluate a given currency's valuation. However, not many governing bodies have emulated the use of gold standard (Lioudis, 2019) . However, gold standards play several roles that are beneficial to the economy of many countries. It controls the power that the government has that might result to price inflation. Price inflation might arise due to excessive giving out of paper currency. Also, it creates conviction in international trade. It achieves this by the case whereby fixed patterns of exchange rates are outlined and given out. Lastly, in terms of monetary payment, it is vital since it has eased congestion in finance offices where people collect their funds. Instead, the payments can just be leased out into one's account, thus making payment to be more accessible. However, this outlines how the gold standard has made monetary trustworthiness easier.
References
Lioudis, N. (2019, February 3). Investopedia . Retrieved from What is the Gold Standard?: https://www.investopedia.com/ask/answers/09/gold-standard.asp
Pettinger, T. (2020). ECONOMICS HELP . Retrieved from Current Account Balance of Payments: https://www.economicshelp.org/blog/glossary/current-account-bop/
Segal, T. (2019, June 1). Investopedia . Retrieved from Understanding Capital And Financial Accounts In The Balance Of Payments: https://www.investopedia.com/investing/understanding-capital-and-financial-accounts-balance-of-payments/
