Unit 6: Open Economy—International Trade and Finance

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Macroeconomics

GDP

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5 Terms

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Balance of Payments (BOP)

is an accounting system to keep track of transactions between countries over a period of time. It is made up of two accounts, the Currect Account (CA) and the Capital and Financial Account (CFA)

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Current Account (CA)

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Capital and Financial Account (CFA)

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Credit or Debit

  • Money in is a credit, and money out is a debit

    • Ex. A citizen of the USA makes a payment to a citizen of country R, the USA has a debit, and country R has a credit

  • The sum of all credit entries should match the sum of all debit entries

  • An increase in the CA balance must be offset by a decrease in the CFA balance

  • An increase in the CFA balance must be offset by a decrease in the CA balance

<ul><li><p>Money in is a <strong>credit,</strong> and money out is a <strong>debit</strong></p><ul><li><p>Ex. A citizen of the USA makes a payment to a citizen of country R, the USA has a <strong>debit,</strong> and country R has a <strong>credit</strong></p></li></ul></li><li><p>The sum of all credit entries should match the sum of all debit entries</p></li><li><p>An increase in the CA balance must be offset by a decrease in the CFA balance</p></li><li><p>An increase in the CFA balance must be offset by a decrease in the CA balance</p></li></ul><p></p>
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Balance of Payments Accounts (Calculations)

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