Macroeconomics: Theory and Policy

23

Balance of Payments

After studying this topic, you should be able to understand

• The balance of payment is a statement which summarizes the exports and imports and the other international transactions between the countries.
• The transactions entering into the balance of payments can be grouped under three broad accounts: current account, capital account and official international reserve account.
• The current account of the balance of payments measures the flow of goods, services and income which occur across the national borders. The capital account of the balance of payments measures the outflow and inflow of capital into the economy.
• The balance of payments of a country will always balance because of the double entry system of book keeping. ...