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Positive Balance of Payments

Question:

"Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."
Briefly comment on this statement?

Answer:

Balance of payments is a measure of net flow of funds from a country; it consists of both long term and short term flow of funds. A positive BOP reflects that the country is gaining from long term and short term transactions in the world and hence, accumulating wealth. Therefore, if the US has a positive BOP then it means that it is accumulating wealth thereby benefitting the economy in the short run as well as long run.

 

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