Balance of Payments International Finance Balance of Payments

Balance of Payments International Finance

Balance of Payments • Current Account – Deficit or Credit • Capital Account – Deficit or Credit • Balance of Trade – Deficit or Surplus • Official Reserves – Strong or Weak Dollar

2008 balance of payments for Zeeland Current Account Capital Account Z-land export of goods ___ Z-land capital going abroad ___ Z-land import of goods ___ Foreign capital coming into Z-land ___ Z-land export of services ___ Balance on capital account ___ Z-land import of services ___ Balance of trade ___ Net investment income ___ Net transfers ___ Balance on current account ___ Balance of payments deficit / surplus___ Official Reserves Account Official Reserves Transaction Balance ___

2008 balance of payments for Zeeland Current Account Capital Account Z-land export of goods +$300 Z-land capital going abroad -$110 Z-land import of goods -400 Foreign capital coming into Z-land +160 Z-land export of services +150 Balance on capital account ___ Z-land import of services -120 Balance of trade ___ Net investment income +10 Net transfers -14 Balance on current account ___ Balance of payments deficit / surplus___ Official Reserves Account Official Reserves Transaction Balance ___

2008 balance of payments for Zeeland Current Account Capital Account Z-land export of goods +$300 Z-land capital going abroad -$110 Z-land import of goods -400 Foreign capital coming into Z-land +160 Z-land export of services +150 Balance on capital account [+$50] Z-land import of services -120 Balance of trade [-$70] Net investment income +10 Net transfers -14 Balance on current account [-$74] Balance of payments deficit / surplus [-$24] Official Reserves Account Official Reserves Transaction Balance ___

2008 balance of payments for Zeeland Current Account Capital Account Z-land export of goods +$300 Z-land import of goods -400 Z-land export of services +150 Z-land import of services -120 Balance of trade [-$70] Net investment income +10 Net transfers -14 Z-land capital going abroad -$110 Foreign capital coming into Z-land +160 Balance on current account [-$74] Balance on capital account [+$50] Balance of payments = zero Official Reserves Account Official Reserves Transaction Balance [+$24]

Current Account Z-land export of goods +$300 foreign currency buys US dollars Z-land import of goods -400 US dollars buy foreign currency Z-land export of services +150 foreign currency buys US dollars Z-land import of services -120 US dollars buy foreign currency Balance of trade [-$70] Net investment income +10 US citizens must use foreign currency income paid, to buy US dollars, if they want to use their income back in the US Net transfers -14 US dollars buy foreign currency for expatriates who live abroad Balance on current account [-$74] Leakage (remember – spending equals income)

Capital Account Z-land capital going abroad -$110 US dollars buy foreign currency for direct investment building or running a firm in a foreign country which pays revenue in that currency or indirect investment savings in foreign securities (equities, bonds) which pays interest in that currency Foreign capital coming into Z-land +160 foreign currency buys US dollars for direct or indirect investment which pays US dollars as revenue or interest Balance on capital account [+$50] Injection (remember – spending equals income)