The balance of payments consists of the current account, the capital account, and the financial account. Explain these three different accounts of the balance of payments.

The Balance of Payments

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The balance of payments consists of the current account, the capital account, and the financial account. Explain these three different accounts of the balance of payments.

Then, consider how the United States has been a trade deficit country for over 50 years. Is it economically healthy for the United States to be a long-term trade deficit country?

Finally, how can the U.S. balance of payments be 0 or close to 0 (with a small statistical discrepancy) when the United States is a trade deficit country? Explain in detail.

Fiscal policy is implemented by the federal government, using government spending or taxes whereas monetary policy is implemented by the Federal Reserve, using open market operations, discount rates, and reserve requirement ratios.

How would (expansionary or contractionary) fiscal policy and monetary policy affect the current account – exports and imports in goods and services – and the exchange rate, respectively?

In what kind of global economic situation would (expansionary or contractionary) fiscal policy and/or monetary policy be used?

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