What is balance of payments?

Definition of Balance of Payments - shows a countries transactions with the rest of the world. Definition of current account, financial/capital account. Balance of payments equilibrium.

Why do economists use the basic balance?

Economists use the basic balance to help determine long-term trends in a country's balance of payments. Like the balance of payments, the basic balance is plotted overtime to give policymakers a clearer idea of their nation's current position in terms of global inflows and outflows.

What is a balancing item in a balance of payments account?

Often when preparing accounts there are slight discrepancies between payments and annual income. The balancing item is used to offset the difference without having to alter the initial calculations. There is a balancing item in the Balance of Payments accounts This occurs when the current account deficit cannot be maintained.