Pricing and Exchange Rates

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One of the more important measures in regard to international economics is the balance of payments. Think of it as a national accounting measure that looks at the flow of goods and services into and out of an economy in a given period of time. It also shows capital flows into and out of a country. Until 1980, the United States tended to run a positive-to-neutral balance of payments position and was a creditor nation. In the course of the past 30 years, the United States has moved to a negative balance of payments and to being a debtor nation.


Review and discuss the following:

  • Discuss the importance of the balance of payments as an accounting measure.
  • Discuss the current account and its components and the capital and financial accounts and their components.
  • How important is the U.S. deficit in traded goods in regard to the balance of payments?

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900-1,100 words

References

Hellerstein, R., & Tille, C. (2008, June). The changing nature of the U.S. balance of payments. Current Issues in Economics and Finance, 14(4). Retrieved from https://www.newyorkfed.org/medialibrary/media/rese...

Stein, H. (2008). Balance of payments. The Concise Encyclopedia of Economics. Retrieved from http://www.econlib.org/library/Enc/BalanceofPaymen...

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Explanation & Answer

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Running head: PRICING AND EXCHANGE RATES

Pricing and Exchange Rates

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PRICING AND EXCHANGE RATES

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The balance of Payments is an effective record of status and economy of any nation, and
financial deals (Hellerstein & Tille, 2008). As an accounting measure, the balance of payments
can be important in various ways. The balance of payments examines the business deals of an
economy into imports and exports of goods and services each year. In this case, the government
can create or prepare policies supporting the domestic organizations after selecting the areas
which have the export-oriented growth potential. The balance of payments has the indications
which the government can use to detect the economy's state, prepare its policies of fiscal,
monetary and inflation control. In case the country needs imports, the government can prepare
policies that are appropriate to divert the technology and funds which are imported to crucial
sections of the economy which can lead to growth in future. The government can also use some
protective actions such as the import duties and higher tariff so that they can encourage the
domestic organizations to be in a position of providing everything they need without the help of
other companies, and also discourage the unnece...


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