Question

     b) Explain how the US Balance of Payment is balanced.

Answer 1

In U.S. the balance of payments for the global transactions are recorded on the basis of the principle used of double-entry in business accounting, wherein each transaction will have two offsetting entries of the same value thus the resulting debit and credit entries are always balance. The country's balance of payment should always be in equilibrium, which means a deficit on one account should be equal to the surplus of the magnitude on the other. Therefore the sum of the current account and the capital account will be zero resulting to a balanced BOP in accounting approach.