Overview
The balance of payments is a vital economic indicator that reflects a country's financial transactions with the rest of the world. It consists of two main accounts: the current account, which tracks trade in goods and services, and the capital account, which records financial transactions. Understan...
Key Terms
Example: A country with a trade surplus has a positive balance of payments.
Example: Exports and imports of goods are recorded in the current account.
Example: Foreign direct investment is recorded in the capital account.
Example: The exchange rate between the US dollar and the euro fluctuates daily.
Example: A trade surplus occurs when exports exceed imports.
Example: Devaluation can make a country's exports cheaper and imports more expensive.
Related Topics
International Trade
The exchange of goods and services between countries, impacting the balance of payments.
intermediateExchange Rate Policies
Policies that govern how a country's currency is valued against others, affecting trade and investment.
advancedGlobal Economic Policies
Strategies implemented by countries to manage their economies in a global context.
advancedKey Concepts
current accountcapital accountexchange ratestrade balance