The balance of payments accounts measure the economic transactions between a country and the rest of the world over a specific period, typically a year. It consists of three main components: the current account, capital account, and financial account.
Imagine you have a personal bank statement that tracks all your income and expenses. The balance of payments is like a country's "bank statement" that keeps track of all its economic interactions with other countries.
Current Account: This term refers to the part of the balance of payments that records transactions related to trade in goods and services, as well as income from investments.
Capital Account: This term refers to the part of the balance of payments that records transfers of ownership or rights to non-financial assets, such as land or patents.
Financial Account: This term refers to the part of the balance of payments that records transactions involving financial assets, such as stocks, bonds, and foreign direct investment.
What does the balance of payments accounts measure?
Which account within the balance of payments measures the difference between a country's exports and imports of goods and services?
How is the circular flow of dollars explained in the balance of payments?
What is the relationship between the current account balance and the capital account balance in the balance of payments?
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