Chapter 3

The Balance of Payments


In general, the balance of payments records a country’s trade in goods, services, and financial assets with the rest of the world. Such trade is divided into useful categories that provide summaries of a nation’s trade. A distinction is made between private (individuals and business firms) and official (government) transactions. This chapter shows that the balance of payments is based on double-entry bookkeeping, providing examples of entries made as credits and debits. The current account is defined as including the value of trade in merchandise, services, primary income, and secondary income. The chapter examines the recent history of US international capital flows, looking at direct investment, security ...

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