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The Balance of Payments

What are open and closed economies?

-An open economy is one that exports and imports goods and services.

-A closed economy is one that does not export or import any goods or services.



What is the balance of payments?

The balance of payments is the record…

Page 2

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The Capital Account of the Balance of Payments:


Foreign investment: E.g. funds coming into a country from abroad to finance a takeover.
Portfolio Investment: this includes money flow to buy shares and buying bonds and debt
issued by firms and the government.

Exchange Rates:

The exchange rate is the price…

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