Unit 7: Balance of Payments (4/9)

The Balance of Payments: measure of money inflows and outflows between the United States and the Rest of the World (ROW). 

- Inflows are referred to as CREDITS

- Outflows are referred to as DEBITS

The Balance of Payments is divided into 3 accounts:

1) Current Account

2) Capital Account

3) Official Reserves Account

Double Entry Bookkeeping

Every transaction in the balance of payments is recorded twice in accordance with standard accounting practice. 

Ex. U.S. Manufacturer, John Deere, exports $50 million worth of farm equipment to Ireland. 

- A credit of $50 million to the current account (-$50 million worth of farm equipment or physical assets)