Balance of Trade

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Balance of Trade

• Accounting for International Exchange

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Objective Distinguish between the balance of
trade and the Balance of Payments

• Balance of Trade The difference between exports
  and imports of goods
• Trade Deficit
• Occurs when a countys imports of goods and
  services exceeds its exports in a given time
  period. X-M) is negative

• Balance of Payments
• A system of accounts that measures transactions
  of goods, services, income and financial assets
  between domestic household, businesses, and
  governments and residents of the rest of the
  world during a specific time period

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The real thing.
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In your textbook.
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A Simplified Version
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Objective Identify the key accounts within the
balance of paymentsCurrent Account transactions

• Merchandise trade exports and imports.
• Service exports and imports
• Transfers (Gifts from people and govt)
• Investment Income

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Capital Account

• Real and Financial Assets
• Investments
• Stock
• Bonds
• Government securities
• Factories

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Official Reserves Account

• Foreign currencies
• Gold
• Special Drawing Rights (SDR) Reserve assets at
  the International Monetary Fund (IMF)
• Reserve position in the IMF
• Financial assets held by an official agency, such
  as U.S. Treasury Department.

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• A CREDIT on the balance of payments is currency
  coming into the county.

• A Debit on the balance of payments is currency
  leaving the country

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