On completion of this chapter students will know how to: List two ways that economic growth is measured; define "modern economic growth" and explain the institutional structures needed for an economy to experience it; identify the general supply, demand, and efficiency forces that give rise to economic growth; describe "growth accounting" and the specific factors accounting for economic growth in the United States. | The Balance of Payments, Exchange Rates, and Trade Deficits Chapter 25 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. This chapter takes a look at a country’s balance of payments, which essentially records all transactions that take place between one country and all the others. In this discussion, we will investigate how official reserves are used to ensure that the balance of payments does balance. Then we will look at how exchange rates are determined and different types of exchange rate systems. Lastly, we will learn about . trade deficits and determine their impacts on the . economy. International Transactions International trade Buy/sell current goods or services Imports and exports International asset transactions Buy/sell real or financial assets Buy stock Sell your house to a foreigner Requires currency exchange LO1 LO1 When individuals who participate in . | The Balance of Payments, Exchange Rates, and Trade Deficits Chapter 25 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. This chapter takes a look at a country’s balance of payments, which essentially records all transactions that take place between one country and all the others. In this discussion, we will investigate how official reserves are used to ensure that the balance of payments does balance. Then we will look at how exchange rates are determined and different types of exchange rate systems. Lastly, we will learn about . trade deficits and determine their impacts on the . economy. International Transactions International trade Buy/sell current goods or services Imports and exports International asset transactions Buy/sell real or financial assets Buy stock Sell your house to a foreigner Requires currency exchange LO1 LO1 When individuals who participate in transactions use the same currency, the transaction exchange is a simple matter since both parties are using the same currencies. When the parties involved are from countries that use different currencies, an intermediate asset transaction must take place first so that the buyer will have the correct currency with which to pay the seller. The process of exchanging currencies creates a market in which a rate of exchange can be determined at an equilibrium rate to clear the market. Balance of Payments Sum of international financial transactions Current account Balance on goods and services Net investment income Net transfers Balance on current account LO2 LO2 The balance of payments is the sum of all international financial transactions taking place between the a nation’s residents and the residents of foreign nations. These transactions primarily fall into either international trade or international asset exchange categories. In the ., the Commerce Department’s Bureau of Economic Analysis .
