Balance of payments
Definition. The balance of payments is a systematic record of all economic transactions between residents of a country and the rest of the world over a given period, usually a year. It is divided into the current account, the capital and financial account, and a balancing item that reconciles measurement errors.
In principle the accounts sum to zero because every transaction has two entries. A current account deficit must be matched by a corresponding inflow on the capital and financial account.
This term belongs to The Balance of Payments in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use balance of payments for marks in the exam? Learn it in class or message the team.