Question

What is meant by international investment positionof a nation, or its balance of international indebtedness? What is its relationship to nation's balance of payments?

Answer 1

Balance of indebtedness means the countries financial statement of its assest and liabilities. When this nalance of indebtedness is compared with other nations it is called as International investment posistion

Balance of indebted ness = Foriegn assests owned by domestic people - domestic assets owned by foriegn people

If the value is positive it means that country is creditor if it is negative than the country is debtor.

Balance of payments means the economic transaction which are done by countries residents with the rest of the world for its imports.

They both are interconnected with each other where balance of payments come under expenditure of nation where as Balance of indebtedness comes under GDP of a nation. Thus they both are required to calculate a countries economy and growth rates .