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LEC II - THE BALANCE OF PAYMENTS

LEC II - THE BALANCE OF PAYMENTS - T H E BAL AN CE OF PAYM...

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THE BALANCE OF PAYMENTS
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The Balance of Payments The balance of payments summarizes all the transactions by residents, firms and government of one country with the rest of the world. The balance of payments involves double-entry bookkeeping. All transactions enter the balance of payments twice - once as a credit and once as a debit. The receipt of payment from foreigners - a capital inflow is credited. (+) The making of payments to foreigners - a capital outflow is debited. (-)
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The Balance of Payments All international transactions are classified into the following three categories A. Current Account B. Capital Account C. Official Settlements Account
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Recording Balance of Payments Transactions Current Account Capital Inflows (+) Capital Outflows (-) Exports of goods/services Imports of goods/services Income earned on U.S assets Income to foreigners on their abroad U.S assets Foreign tourists in U.S American tourists abroad Receipt of unilateral Payment of unilateral transfers transfers
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Recording Balance of Payments
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