CHAPTER 2 : INTERNATIONAL FLOWS OF FUNDS

Balance of payments is a record of all international economic transactions including trade,

finance and monetary among domestic and foreign population over a certain period in the
country. Balance payments is accounting system that measures the performance of a country in
which every transaction is recorded as a credit and another as a debit.
Current Account is transactions consist of the import and export of goods and services. In the
current account, exports recorded as a credit for earning foreign exchange for the country.
Imports recorded as a debit due to eject foreign exchange from the State
International Current Account U.S
Exports of goods and services and income receipts (4)
(1) Goods

= $1,279
+ $712

+ (2) Services

292

+ (3) Income receipts

275

Imports of goods and services and income receipts (8)

(5) Goods

= $1768
$1,263

+ (6) Services

246

+ (7) Income receipts

259

Unilateral current transfers, net(9)

Balance on current account

$557

(4) (8) (9)

$68

Capital account, which recorded a financial asset transactions, transfer payments, receivables and
international debt. This includes recording will FDI (foreign direct investment), the payment of
dividends, debt repayments, interest or debt, purchase of securities, shares, and so forth. Capital
account to measure the entry and exit of foreign exchange.
International trade is a trade that is made by a resident of a country with the population of
another country on the basis of mutual agreement. In many countries, international trade became
one of the main factors to boost GDP.

Distribution of U.S exports and imports the biggest is Canada 23,78% because because of the
similarity of culture and way of life, as well as Canada and U.S near and still in one continent.
Trade Agreement - This is an agreement made that obstacle can be reduced:
1. in 1988 U.S and Canada free trade pac.
2. North American Free Trade Agreement (NAFTA).
3. General Agreement on Traffics and Trade (GATT).
4. Single European Act and the European Union.
Trade Disagreement : different environmental, laws regulations, bribing, government subsidies.
Several factors that affect the flow of international trade:
1. Inflation
Inflation is increase price as continuously for long time. If Inflation increase in many
country, then the country's current account will decrease. This is because people will buy
more goods and the country's exports declined.
2. National Income
If the income of a country is increased, then the country's current account will decrease.
Because imports also increase.
3. Government Restriction
The government of a country can limit or impede imports from other countries. Trade
restrictions are most commonly used among other duties and the quota.
4. Exchange Rate
If the value of a country's currency is increased then the current account balance would
fall. This is because of the high increase imports will decrease demand of goods.