Principles of Macroeconomics / Unit 7 MAC 0606 short lesson, about 20 seconds
The Balance of Payments Identity
Captions available
The idea
Because every purchase abroad is paid for, the accounts balance. A current account deficit is matched by an equal net inflow recorded in the financial account.
In practice
Goods come one way; the claims that pay for them go the other.
Where people slip
The two are not two facts but one fact recorded twice, which is why they must offset.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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