Why do the balance of payments statements always balance?

| July 27, 2015

The focus of this chapter is to learn how nations record international foreign purchases and sales of goods, services and international financial transactions. The ledger for recording these transactions is the nations ”balance of payments”.  Extensive data is available and as you do your final your understanding of this data is critical. So, share and discuss your understanding of the following.

Why do the balance of payments statements always balance?

Contrast the meaning of a surplus /deficit in the balance of merchandise trade, or in the balance of trade in goods and services; current account balance?

Why do we conclude that a persistent deficit in the current account balance will lead to rise in a country’s indebtedness?

Does the US run a surplus or deficit in its current account and is the US a creditor or debtor nation?

 

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