Balance of Payments : When American citizens and firms exchange goods and services with foreign consumers and firms, payments are sent back and forth through.

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Balance of Payments : When American citizens and firms exchange goods and services with foreign consumers and firms, payments are sent back and forth through major banks around the world. ………= A country’s balance of payments accounts : record its international trading, borrowing, and lending. = THE BALANCE B/W ALL PAYMENTS THE U.S. RECEIVES FROM FOREIGNERS and ALL PAYMENTS MADE TO FOREIGNERS

Current account shows current import and export payments of both goods and services. It also reflects investment income sent to foreign investors and investment income received by U.S. citizens who invest abroad. If the balance on a current account is -$20 million = deficit which tells us that the US sent more American dollars abroad than foreign currency received in current transactions

Capital account records foreign investment in the US minus US investment abroad. When a nation buys a foreign firm, real estate, or financial asset (bonds) of another nation. A surplus balance of (+ $11 billion) tells us that there was more foreign capital investment in the US than there was US investment abroad.

Capital flow - Capital flight -

Official RESERVES Account The Federal Reserve holds quantities of foreign currency called official reserves. US official reserves are the government’s holdings of foreign currency. If US official reserves increase, the official reserve (settlements) account balance is negative. The reason is; that holding foreign money is like investing abroad

US imports = demand for foreign currency and a supply of US dollars US exports = supply of foreign currency and a demand for US dollars Current + Capital < 0, balance of payment deficit Current + Capital > 0, balance of payment surplus