MAcro CHAPTER 6.1:

Balance of Payments Accounts

CHAPTER SUMMARY

This unit focuses on international economics & trade between countries. We keep track of all the money and goods exchanged between countries using balance of payments accounts. There are two types of accounts: capital accounts and current accounts.

Capital accounts basically capture money exchanged between countries for business investment, such as:

Financial Investment: a Canadian company spends money to buy the stock of a company in Brazil
Real Investment: a Korean company spends money to build a factory in Vietnam

Current accounts capture everything else:

Exports & Imports: Consumers buying things from other countries
Investment Returns: Dividends (profits paid to owners of companies) & interest paid from people/companies in one country to another
Transfers: Countries sending money to other countries, usually for aid (helping poor countries)

All of these things are measured on net, which means that we take all the money coming in minus all the money coming out. For example, Net Exports = Exports (money comes into our country because we sold something to another country) minus Imports (money goes out of our country because we bought something from another country).

When the total money in is greater than the total money out, a country has an overall surplus, and when the total money out is greater than the total money in, a country has an overall deficit. We can also apply this rule to specific parts of the accounts. For example, when Net Exports is positive, we call it a trade surplus, and when net exports is negative, we call it a trade deficit.

CHAPTER VIDEOS

CHAPTER READINGS

AP Macro Unit 6: Open Economy Int'l Trade Finance | FiveableLearn about balance of payments accounts and more in this AP Macro Unit 6.1 guide!

7 Keys to the Balance of Payments - AP/IB/College - ReviewEcon.comComprehending the balance of payments is important to fully understand the interdependence between economies around the world. The balance of payments is critical to macroeconomics because it has a connection to all of the macroeconomic models.

Textbook

CHAPTER PRACTICE

Albert | Learn by doing | Grades 5-12 reading, writing, math, science, and test prepAlbert provides students with personalized learning experiences in core academic areas while providing educators with actionable data. Leverage world-class, standards aligned practice content for AP, Common Core, NGSS, SAT, ACT, and more.

20 Question Balance of Payments Game - ReviewEcon.com20 question review game with explanations to test your knowledge of the balance of payments. For AP, IB, or College Macroeconomics Review.

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