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One of the more important measures in regard to international economics is the balance of payments. Think of it as a national accounting measure that looks at the flow of goods and services into and out of an economy in a given period of time. It also shows capital flows into and out of a country. Until 1980, the United States tended to run a positive-to-neutral balance of payments position and was a creditor nation. In the course of the past 30 years, the United States has moved to a negative balance of payments and to being a debtor nation.

Review and discuss the following:

  • Discuss the importance of the balance of payments as an accounting measure.
  • Discuss the current account and its components and the capital and financial accounts and their components.
  • How important is the U.S. deficit in traded goods in regard to the balance of payments?

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