does anyone have any good tricks for remembering what happens in each component of the BOP accounts? I understand it when I read it but it seems as soon as I turn the page I forget…should have paid more attention in undergrad econ I guess…thanks in advance Dubs
I think the main part of each component of BOP, the Current and Financial Account are Net Exports and Capital Flows respectively. If you have negative net exports, that means you are importing more than you export, which means you pay more money overseas than you receive, so you have a current account deficit. A CA deficit would need to be financed by foreign investors putting money into the domestic country, that is, a net inflow of capital. So you have more money coming in than going out, meaning a financial account surplus. Hope that helps and all the best.