AP MacroeconomicsInternational Trade & Finance
Balance of Payments
The balance of payments is a record of all economic transactions between a country and the rest of the world over a period.
It is made up mainly of the current account (trade and income flows) and the capital and financial account (asset flows). The two broadly offset each other, so the overall balance tends toward zero. A current account deficit is mirrored by a financial account surplus.
Formula / Example
Current account + Capital and financial account ≈ 0.
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