ch5 - payment dividends etc • Income payments...

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Macroeconomics Chapter 5 Saving and Investment in the Open Economy Open economy: spending need doesn’t equal production in every period Closed economy: spending has to equal production in every period Balance of payments accounts are the record of a country’s international transactions Any transaction that involves an inflow of funds to the U.S. is a credit Any transaction that involves an outflow of funds from the U.S. is a debit Current account: measures a country’s trade in currently produced goods and services, along with unilateral transfers between countries Current account components: net exports, net income from abroad, net unilateral transfers Net income from abroad = income receipts from abroad – income payments to residents of other countries Income receipts: credit items; compensation received from residents working abroad plus investment income from assets abroad (interest
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Unformatted text preview: payment, dividends, etc.) • Income payments: compensation paid to foreign residents working in the country plus payments to foreign owners of assets in the country • Unilateral transfers: payments form one country to another that don’t correspond to the purchase of any good, service, or asset • Net unilateral transfers = transfers received – transfers given • Current account balance > 0, surplus; CA < 0, deficit • Capital account balance measures the net flow of assets unilaterally transferred into the country • Financial account: selling of assets from one country to another • Official reserve assets: assets other than domestic money than can be used in making international payments • Official settlements balance—balance of payments—net increase (domestic less foreign) in a country’s official reserve assets...
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