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Unformatted text preview: Chapter 19 The Balance-of-Payments Accounts CHAPTER 19 THE BALANCE-OF-PAYMENTS ACCOUNTS Learning Objectives: To understand what is meant by a countrys balance-of-payments statement and how it is constructed. To grasp the difference between alternative accounting balances within the balance of payments. To become aware of the recent balance-of-payments experience of the United States. To know what is meant by the international investment position of a country. I. Outline Introduction- Chinas Trade Surpluses and Deficits Recent Growth of Trade and Capital Movements Credits and Debits in Balance-of-Payments Accounting Sample Entries in the Balance-of-Payments Accounts Assembling a Balance-of-Payments Summary Statement Balance-of-Payments Summary Statement for the United States International Investment Position of the United States Summary II. Special Chapter Features In the Real World: Current Account Deficits In the Real World: U.S. Trade Deficits with Japan, China, OPEC, and Canada In the Real World: Trends in the U.S. International Investment Position III. Purpose of Chapter The purpose of this chapter is to present the basic principles of balance-of-payments accounting and to discuss the several concepts of balance in a countrys balance of payments. With a working knowledge of balance-of-payments concepts in hand, students will be better able to understand the operation of foreign exchange markets, which are discussed in succeeding chapters. 19-1 Chapter 19 The Balance-of-Payments Accounts IV. Teaching Tips A. Students often find balance-of-payments accounting uninteresting. However, in recent years, U.S. trade deficits, and particularly the deficits with China, have been continuously in the news. The opening vignette in this chapter provides background on this issue and will hopefully get students thinking of the importance of understanding what BOP surpluses and deficits mean and when they might be of concern to policymakers. You can also use this case to illustrate the point that a trade surplus of a country with one trading partner does not always accurately reflect the overall situation a surplus with one trading partner is often associated with deficits with other trading partners. B. The financial account classifications in the debit and credit categories are often difficult for students to understand. Sometimes it is helpful to stress that debit items are items that, other things equal, reflect an increase in the net claims ( assets - liabilities) of the home country on foreign countries (increase in foreign assets owned by home country citizens or government, decrease in home country assets owned by foreign citizens or government). Credit items reflect, other things equal, an increase in net claims of foreign countries on the home country (decrease in foreign assets owned by home country citizens or government, increase in home country assets owned by foreign citizens or government). assets owned by foreign citizens or government)....
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This note was uploaded on 11/27/2009 for the course ECON 421 taught by Professor Macphee,c during the Spring '08 term at UNL.
- Spring '08