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What is a positive balance of payments?

What is a positive balance of payments?

Positive Balance Of Payments – A statement that summarizes an economy’s transactions with the rest of the world for a specified time period.

The balance of payments, also known as balance of international payments, encompasses all transactions between a country’s residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts.

The balance of payments classifies these transactions in two accounts – the current account and the capital account.

The current account includes transactions in goods, services, investment income and current transfers, while the capital account mainly includes transactions in financial instruments.

An economy’s balance of payments transactions and international investment position (IIP) together constitute its set of international accounts.

The United States could have a trade deficit, but a positive balance of payments if much of the money spent on foreign goods returned when foreigners consumed American services and invested in American industries.


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