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B A L A N C E O F P A Y M E N T S Currrent account = trade balance= net exports Real goods and services - imports Money Home Abroad Real goods and services - exports CAPITAL ACCOUNT Titles to foreign wealth sold to Americans Money Home Abroad Titles to American wealth sold to foreigners Unilateral transfers Home Money Abroad Price of a Dollar ¥/$ $ in Foreign Exchange Mkt Price of Yen $/¥ ¥ in Foreign Exchange Mkt U.S. Accounts, 1984 ($billions) Personal consumption expenditures C+I+X-Imp+F+S Dep IndTax (-SS-RE-CT+NI+Tr 2342 2342 Gross private domestic investment 637 637 Exports 364 364 Imports 430 -430 Federal government purchases 296 296 State and local government purchases 452 452 Depreciation 403 Indirect business taxes 304 Social security taxes 306 -306 Retained earnings 118 -118 88 -88 Net interest 150 150 Transfer payments 418 418 Personal taxes 435 Corporate profits tax liability -304 -435 3661 GDP 3661 NI=NDP-IndTax PI=NI-SS-RE-CT+NI+Tr DI=PI-PT Saving=DI-C -2342 -403 Cumulative: NDP=GDP-Dep PT -403 -304 56 -435 -2342 3258 2954 3010 2575 233 Fundamental Balances Injections (create jobs)= Leakages (lose jobs) Investment+GovtExpend+Exports=Saving+Taxes+Imports In terms of balances this is rewritten: (Exports-Imports)=(Savings-Investment)+(Taxes-GovtExpend) External Balance =Private Balance +Government Balance
