Balance of Payments

Discipline: Economics

Balance of payments is to a country what a balance sheet is to a company. It exhibits the country's payment flows with other countries.

Balance of payments consists of two major components: the current account, and the financial account. The current account reflects the flow of goods, services, and incomes; and the financial account reflects the purchase and sale of domestic and foreign assets.

When the country has more debits (payments and liabilities to foreigners) than credits (payments and obligations received from foreigners), the country has a deficit in the balance of payments.

Also see: balance sheet, current account, financial account

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