Open Economy: International Trade and Finance

Transactions involving goods and services.

Movements of capital assets between countries.

Transfers related to stock investments by foreigners.

Changes in a country's holdings of foreign currency reserves.

When a country has more exports than imports

When a country does not engage in international trade

When a country has more imports than exports

When a country has an equal amount of imports and exports

Net income

Net transfers

Net exports

Net investments

Capital account

Financial investments account

Current account

Official reserves account

Net exports and imports of goods and services

Net transfers of income between countries

Financial and real investments between countries

Official reserves held by the central bank

Only financial investments between countries

Only transfers of income between countries

All international transactions in a year

Only exports and imports of goods

Reserve holdings by the central bank

Purchase of foreign and domestic land and businesses

Transfer of income between countries

Purchase of goods and services from other countries

Financial account

Current account

Balance of trade

Capital account

It will solely improve the current account as higher rates attract foreign goods buyers.

It may improve financial account balance due to increased foreign investment but potentially worsen current account due to higher exchange rate.

It will lead exclusively to an outflow of financial resources due to decreased competitiveness.

It has no effect on balance of payments since capital flows and interest rates are unrelated under high capital mobility conditions.

Reducing government spending to decrease national income and import levels.

Implementing supply-side policies such as tax incentives for exporting industries.

Depreciating the domestic currency to make exports cheaper and imports more expensive.

Increasing tariffs on imported goods to reduce the quantity of imports.