CHAPTER11THEBALANCEOFPAYMENTSMULTIPLECHOICEQUESTIONS1ONTHEBALANCEOFPAYMENTSSTATEMENTS,MERCHANDISEIMPORTSARECLASSIFIEDINTHEACURRENTACCOUNTBCAPITALACCOUNTCUNILATERALTRANSFERACCOUNTDOFFICIALSETTLEMENTSACCOUNT2THEBALANCEOFINTERNATIONALINDEBTEDNESSISARECORDOFACOUNTRYSINTERNATIONALAINVESTMENTPOSITIONOVERAPERIODOFTIMEBINVESTMENTPOSITIONATAFIXEDPOINTINTIMECTRADEPOSITIONOVERAPERIODOFTIMEDTRADEPOSITIONATAFIXEDPOINTINTIME3WHICHBALANCEOFPAYMENTSITEMDOESNOTDIRECTLYENTERINTOTHECALCULATIONOFTHEUSGROSSDOMESTICPRODUCTAMERCHANDISEIMPORTSBSHIPPINGANDTRANSPORTATIONRECEIPTSCDIRECTFOREIGNINVESTMENTDSERVICEEXPORTS4WHICHOFTHEFOLLOWINGISCONSIDEREDACAPITALINFLOWAASALEOFUSFINANCIALASSETSTOAFOREIGNBUYERBALOANFROMAUSBANKTOAFOREIGNBORROWERCAPURCHASEOFFOREIGNFINANCIALASSETSBYAUSBUYERDAUSCITIZENSREPAYMENTOFALOANFROMAFOREIGNBANK5WHICHOFTHEFOLLOWINGWOULDCALLFORINPAYMENTSTOTHEUNITEDSTATESAAMERICANIMPORTSOFGERMANSTEELBGOLDFLOWINGOUTOFTHEUNITEDSTATESCAMERICANUNILATERALTRANSFERSTOLESSDEVELOPEDCOUNTRIESDAMERICANFIRMSSELLINGINSURANCETOBRITISHSHIPPINGCOMPANIES6INACOUNTRYSBALANCEOFPAYMENTS,WHICHOFTHEFOLLOWINGTRANSACTIONSAREDEBITSADOMESTICBANKBALANCESOWNEDBYFOREIGNERSAREDECREASEDBFOREIGNBANKBALANCESOWNEDBYDOMESTICRESIDENTSAREDECREASEDCASSETSOWNEDBYDOMESTICRESIDENTSARESOLDTONONRESIDENTSDSECURITIESARESOLDBYDOMESTICRESIDENTSTONONRESIDENTS7WHICHOFTHEFOLLOWINGISCLASSIFIEDASACREDITINTHEUSBALANCEOFPAYMENTSAUSEXPORTSBUSGIFTSTOOTHERCOUNTRIESCAFLOWOFGOLDOUTOFTHEUSDFOREIGNLOANSMADEBYUSCOMPANIESTABLE111GIVESHYPOTHETICALFIGURESFORUSINTERNATIONALTRANSACTIONSONTHEBASISOFTHISINFORMATION,ANSWERQUESTIONS8AND9TABLE111USINTERNATIONALTRANSACTIONSAMOUNTTRANSACTIONBILLIONSOFDOLLARSMERCHANDISEIMPORTS110MILITARYTRANSACTIONS,NET5REMITTANCES,PENSIONS,TRANSFERS20USPRIVATEASSETSABROAD50MERCHANDISEEXPORTS115INVESTMENTINCOME,NET15USGOVERNMENTGRANTSEXCLUDINGMILITARY5FOREIGNPRIVATEASSETSINTHEUS25COMPENSATIONOFEMPLOYEES5ALLOCATIONOFSDRS5TRAVELANDTRANSPORTATIONRECEIPTS,NET208BASEDONTHEINFORMATIONPROVIDEDINTABLE111,THEGOODSANDSERVICESBALANCEEQUALSA5BILLIONB15BILLIONC20BILLIOND25BILLION9BASEDONTHEINFORMATIONPROVIDEDINTABLE111,THECURRENTACCOUNTBALANCEEQUALSA5BILLIONB10BILLIONC15BILLIOND20BILLION10UNLIKETHEBALANCEOFPAYMENTS,THEBALANCEOFINTERNATIONALINDEBTEDNESSINDICATESTHEINTERNATIONALAINVESTMENTPOSITIONOFACOUNTRYATAGIVENMOMENTINTIMEBINVESTMENTPOSITIONOFACOUNTRYOVERAONEYEARPERIODCTRADEPOSITIONOFACOUNTRYATAGIVENMOMENTINTIMEDTRADEPOSITIONOFACOUNTRYOVERAONEYEARPERIOD11WHICHOFTHEFOLLOWINGINDICATESTHEINTERNATIONALINVESTMENTPOSITIONOFACOUNTRYATAGIVENMOMENTINTIMEATHEBALANCEOFPAYMENTSBTHECAPITALACCOUNTOFTHEBALANCEOFPAYMENTSCTHECURRENTACCOUNTOFTHEBALANCEOFPAYMENTSDTHEBALANCEOFINTERNATIONALINDEBTEDNESS12CONCERNINGTHEUSBALANCEOFPAYMENTS,WHICHACCOUNTISDEFINEDINESSENTIALLYTHESAMEWAYASTHENETEXPORTOFGOODSANDSERVICES,WHICHCOMPRISESPARTOFTHECOUNTRYSGROSSDOMESTICPRODUCTAMERCHANDISETRADEACCOUNTBGOODSANDSERVICESACCOUNTCCURRENTACCOUNTDCAPITALACCOUNT13IFANAMERICANRECEIVESDIVIDENDSFROMTHESHARESOFSTOCKSHEORHEOWNSINTOYOTA,INC,AJAPANESEFIRM,THETRANSACTIONWOULDBERECORDEDONTHEUSBALANCEOFPAYMENTSASAACAPITALACCOUNTDEBITBCAPITALACCOUNTCREDITCCURRENTACCOUNTDEBITDCURRENTACCOUNTCREDIT14IFTHEUNITEDSTATESGOVERNMENTSELLSMILITARYHARDWARETOSAUDIARABIA,THETRANSACTIONWOULDBERECORDEDONTHEUSBALANCEOFPAYMENTSASAACURRENTACCOUNTDEBITBCURRENTACCOUNTCREDITCCAPITALACCOUNTDEBITDCAPITALACCOUNTCREDIT15THEUSBALANCEOFTRADEISDETERMINEDBYAEXCHANGERATESBGROWTHOFECONOMIESOVERSEASCRELATIVEPRICESINWORLDMARKETSDALLOFTHEABOVE16USMILITARYAIDGRANTEDTOFOREIGNCOUNTRIESISENTEREDINTHEAMERCHANDISETRADEACCOUNTBCAPITALACCOUNTCCURRENTACCOUNTDOFFICIALSETTLEMENTSACCOUNT17IFTHEUSFACESABALANCEOFPAYMENTSDEFICITONTHECURRENTACCOUNT,ITMUSTRUNASURPLUSONATHEOFFICIALSETTLEMENTSACCOUNTBTHECAPITALACCOUNTCEITHERTHEOFFICIALSETTLEMENTSACCOUNTORTHECAPITALACCOUNTDBOTHTHEOFFICIALSETTLEMENTSACCOUNTANDTHECAPITALACCOUNT18THECURRENTACCOUNTOFTHEUSBALANCEOFPAYMENTSDOESNOTINCLUDEAINVESTMENTINCOMEBMERCHANDISEEXPORTSANDIMPORTSCTHESALEOFSECURITIESTOFOREIGNERSDUNILATERALTRANSFERS19THEUSHASABALANCEOFTRADEDEFICITWHENITSAMERCHANDISEEXPORTSEXCEEDITSMERCHANDISEIMPORTSBMERCHANDISEIMPORTSEXCEEDITSMERCHANDISEEXPORTSCGOODSANDSERVICESEXPORTSEXCEEDITSGOODSANDSERVICESIMPORTSDGOODSANDSERVICESIMPORTSEXCEEDITSGOODSANDSERVICESEXPORTS20THEVALUETOAMERICANRESIDENTSOFINCOMEEARNEDFROMOVERSEASINVESTMENTSSHOWSUPINWHICHACCOUNTINTHEUSBALANCEOFPAYMENTSACURRENTACCOUNTBTRADEACCOUNTCUNILATERALTRANSFERSACCOUNTDCAPITALACCOUNTUSINGTHEDATAOFTABLE112,ANSWERQUESTION21TABLE112INTERNATIONALINVESTMENTPOSITIONOFTHEUNITEDSTATESUSASSETSABROADUSGOVERNMENTASSETS800BILLIONUSPRIVATEASSETS200BILLIONFOREIGNASSETSINTHEUSFOREIGNOFFICIALASSETS600BILLIONFOREIGNPRIVATEASSETS300BILLION21CONSIDERTABLE112THEUSBALANCEOFINTERNATIONALINDEBTEDNESSSUGGESTSTHATTHEUNITEDSTATESISANETADEBTORBCREDITORCSPENDERDEXPORTER22FORTHEFIRSTTIMESINCEWORLDWARI,IN1985THEUNITEDSTATESBECAMEANETINTERNATIONALAEXPORTERBIMPORTERCDEBTORDCREDITOR23ACOUNTRYTHATISANETINTERNATIONALDEBTORINITIALLYEXPERIENCESAANAUGMENTEDSAVINGSPOOLAVAILABLETOFINANCEDOMESTICSPENDINGBAHIGHERINTERESTRATE,WHICHLEADSTOLOWERDOMESTICINVESTMENTCALOSSOFFUNDSTOTRADINGPARTNERSOVERSEASDADECREASEINITSSERVICESEXPORTSTOOTHERCOUNTRIES24CREDITITEMSINTHEBALANCEOFPAYMENTSCORRESPONDTOANYTHINGTHATAINVOLVESRECEIPTSFROMFOREIGNERSBINVOLVESPAYMENTSTOFOREIGNERSCDECREASESTHEDOMESTICMONEYSUPPLYDINCREASESTHEDEMANDFORFOREIGNEXCHANGE25DEBTITEMSINTHEBALANCEOFPAYMENTSCORRESPONDTOANYTHINGTHATAINVOLVESRECEIPTSFROMFOREIGNERSBINVOLVESPAYMENTSTOFOREIGNERSCINCREASESTHEDOMESTICMONEYSUPPLYDDECREASESTHEDEMANDFORFOREIGNEXCHANGE26WHENALLOFTHEDEBITORCREDITITEMSINTHEBALANCEOFPAYMENTSARECOMBINEDAMERCHANDISEIMPORTSEQUALMERCHANDISEEXPORTSBCAPITALIMPORTSEQUALCAPITALEXPORTSCSERVICESEXPORTSEQUALSERVICESIMPORTSDTHETOTALSURPLUSORDEFICITEQUALSZERO27INTHEBALANCEOFPAYMENTS,THESTATISTICALDISCREPANCYISUSEDTOAENSURETHATTHESUMOFALLDEBITSMATCHESTHESUMOFALLCREDITSBENSURETHATTRADEIMPORTSEQUALTHEVALUEOFTRADEEXPORTSCOBTAINANACCURATEACCOUNTOFABALANCEOFPAYMENTSDEFICITDOBTAINANACCURATEACCOUNTOFABALANCEOFPAYMENTSSURPLUS28ALLOFTHEFOLLOWINGARECREDITITEMSINTHEBALANCEOFPAYMENTS,EXCEPTAINVESTMENTINFLOWSBMERCHANDISEEXPORTSCPAYMENTSFORAMERICANSERVICESTOFOREIGNERSDPRIVATEGIFTSTOFOREIGNRESIDENTS29ALLOFTHEFOLLOWINGAREDEBITITEMSINTHEBALANCEOFPAYMENTS,EXCEPTACAPITALOUTFLOWSBMERCHANDISEEXPORTSCPRIVATEGIFTSTOFOREIGNERSDFOREIGNAIDGRANTEDTOOTHERNATIONS30THEROLEOF_ISTODIRECTONENATIONSSAVINGSINTOANOTHERNATIONSINVESTMENTSAMERCHANDISETRADEFLOWSBSERVICESFLOWSCCURRENTACCOUNTFLOWSDCAPITALFLOWS31WHENACOUNTRYREALIZESADEFICITONITSCURRENTACCOUNTAITSNETFOREIGNINVESTMENTPOSITIONBECOMESPOSITIVEBITBECOMESANETDEMANDEROFFUNDSFROMOTHERCOUNTRIESCITREALIZESANEXCESSOFIMPORTSOVEREXPORTSONGOODSANDSERVICESDITBECOMESANETSUPPLIEROFFUNDSTOOTHERCOUNTRIES32REDUCINGACURRENTACCOUNTDEFICITREQUIRESACOUNTRYTOAINCREASEPRIVATESAVINGRELATIVETOINVESTMENTBINCREASEPRIVATECONSUMPTIONRELATIVETOSAVINGCINCREASEPRIVATEINVESTMENTRELATIVETOCONSUMPTIONDINCREASEPRIVATEINVESTMENTRELATIVETOSAVING33REDUCINGACURRENTACCOUNTDEFICITREQUIRESACOUNTRYTOAINCREASETHEGOVERNMENTSDEFICITANDINCREASEPRIVATEINVESTMENTRELATIVETOSAVINGBINCREASETHEGOVERNMENTSDEFICITANDDECREASEPRIVATEINVESTMENTRELATIVETOSAVINGCDECREASETHEGOVERNMENTSDEFICITINCREASEPRIVATEINVESTMENTRELATIVETOSAVINGDDECREASETHEGOVERNMENTSDEFICITANDDECREASEPRIVATEINVESTMENTRELATIVETOSAVING34REDUCINGACURRENTACCOUNTSURPLUSREQUIRESACOUNTRYTOAINCREASETHEGOVERNMENTSDEFICITANDINCREASEPRIVATEINVESTMENTRELATIVETOSAVINGBINCREASETHEGOVERNMENTSDEFICITANDDECREASEPRIVATEINVESTMENTRELATIVETOSAVINGCDECREASETHEGOVERNMENTSDEFICITANDINCREASEPRIVATEINVESTMENTRELATIVETOSAVINGDDECREASETHEGOVERNMENTSDEFICITANDDECREASEPRIVATEINVESTMENTRELATIVETOSAVING35CONCERNINGACOUNTRYSBUSINESSCYCLE,RAPIDGROWTHOFPRODUCTIONANDEMPLOYMENTISCOMMONLYASSOCIATEDWITHALARGEORGROWINGTRADEDEFICITSANDCURRENTACCOUNTDEFICITSBLARGEORGROWINGTRADEDEFICITSANDCURRENTACCOUNTSURPLUSESCSMALLORSHRINKINGTRADEDEFICITSANDCURRENTACCOUNTDEFICITSDSMALLORSHRINKINGTRADEDEFICITSANDCURRENTACCOUNTSURPLUSES36THEBURDENOFACURRENTACCOUNTDEFICITWOULDBETHELEASTIFANATIONUSESWHATITBORROWSTOFINANCEAUNEMPLOYMENTCOMPENSATIONBENEFITSBSOCIALSECURITYBENEFITSCEXPENDITURESONFOODANDRECREATIONDINVESTMENTONPLANTANDEQUIPMENT37CONCERNINGACOUNTRYSBUSINESSCYCLE,_ISCOMMONLYASSOCIATEDWITHLARGEORGROWINGCURRENTACCOUNTDEFICITSARAPIDGROWTHRATESOFPRODUCTIONANDEMPLOYMENTBSLOWGROWTHRATESOFPRODUCTIONANDEMPLOYMENTCFALLINGINTERESTRATESONGOVERNMENTSECURITIESDFALLINGINTERESTRATESONCORPORATESECURITIES38ACCORDINGTORESEARCHERSATTHEFEDERALRESERVE,THELOSSOFJOBSASSOCIATEDWITHADEFICITINTHECURRENTACCOUNTTENDSTOBEAOFFSETBYTHEINCREASEOFJOBSASSOCIATEDWITHASURPLUSINTHECAPITALACCOUNTBREINFORCEDBYTHEDECREASEOFJOBSASSOCIATEDWITHASURPLUSINTHECAPITALACCOUNTCATHREATTOTHELEVELOFEMPLOYMENTFORTHEECONOMYASAWHOLEDOFNOLONGRUNECONOMICCONSEQUENCEFORWORKERSWHOLOSETHEIRJOBSTRUEFALSEQUESTIONSTABLE113SHOWSHYPOTHETICALTRANSACTIONS,INBILLIONSOFUSDOLLARS,THATTOOKPLACEDURINGAYEARANSWERTHENEXTSEVENQUESTIONSONTHEBASISOFTHISINFORMATIONTABLE113INTERNATIONALTRANSACTIONSOFTHEUNITEDSTATESAMOUNTTRANSACTIONBILLIONSOFDOLLARSALLOCATIONOFSDRS10CHANGESINUSASSETSABROAD100STATISTICALDISCREPANCY15MERCHANDISEIMPORTS400PAYMENTSONFOREIGNASSETSINUS20REMITTANCES,PENSIONS,TRANSFERS60TRAVELANDTRANSPORTATIONRECEIPTS,NET30MILITARYTRANSACTIONS,NET10INVESTMENTINCOME,NET100MERCHANDISEEXPORTS350USGOVERNMENTGRANTSEXCLUDINGMILITARY20CHANGESINFOREIGNASSETSINTHEUS190OTHERSERVICES,NET80RECEIPTSONUSINVESTMENTSABROAD30COMPENSATIONOFEMPLOYEES10TF1CONSIDERTABLE113THEMERCHANDISETRADEBALANCEREGISTEREDADEFICITOF50BILLIONTF2CONSIDERTABLE113THESERVICESBALANCEREGISTEREDASURPLUSOF100BILLIONTF3CONSIDERTABLE113THEGOODSANDSERVICESBALANCEREGISTEREDASURPLUSOF50BILLIONTF4CONSIDERTABLE113THEUNILATERALTRANSFERSBALANCEREGISTEREDADEFICITOF40BILLIONTF5CONSIDERTABLE113THECURRENTACCOUNTBALANCEREGISTEREDASURPLUSOF30BILLIONTF6CONSIDERTABLE113THE“NETEXPORTS”COMPONENTOFTHEUSGROSSDOMESTICPRODUCTREGISTERED110BILLIONTF7CONSIDERTABLE113THEPAYMENTSDATASUGGESTTHATTHEUNITEDSTATESWASA“NETDEMANDER”O(jiān)F30BILLIONFROMTHERESTOFTHEWORLDTF8THEBALANCEOFPAYMENTSREFERSTOTHESTOCKOFTRADEANDINVESTMENTTRANSACTIONSTHATEXISTSATAPARTICULARPOINTINTIMETF9REFERRINGTOTHEBALANCEOFPAYMENTSSTATEMENT,ANINTERNATIONALTRANSACTIONREFERSTOTHEEXCHANGEOFGOODS,SERVICES,ANDASSETSBETWEENRESIDENTSOFONECOUNTRYANDTHOSEABROADTF10THEBALANCEOFPAYMENTSINCLUDESINTERNATIONALTRANSACTIONSOFHOUSEHOLDSANDBUSINESSES,BUTNOTGOVERNMENTTF11BECAUSETHEBALANCEOFPAYMENTSUTILIZESDOUBLEENTRYACCOUNTING,MERCHANDISEEXPORTSWILLALWAYSBEINBALANCEWITHMERCHANDISEIMPORTSTF12ONTHEUSBALANCEOFPAYMENTSSTATEMENT,THEFOLLOWINGTRANSACTIONSARECREDITS,LEADINGTOTHERECEIPTOFDOLLARSFROMFOREIGNERSMERCHANDISEEXPORTS,TRANSPORTATIONRECEIPTS,INCOMERECEIVEDFROMINVESTMENTSABROAD,ANDINVESTMENTSINTHEUNITEDSTATESBYFOREIGNRESIDENTSTF13ONTHEUSBALANCEOFPAYMENTS,THEFOLLOWINGTRANSACTIONSAREDEBITS,LEADINGTOPAYMENTSTOFOREIGNERSMERCHANDISEIMPORTS,TRAVELEXPENDITURES,GIFTSTOFOREIGNRESIDENTS,ANDOVERSEASINVESTMENTSBYUSRESIDENTSTF14THE“GOODSANDSERVICES”ACCOUNTOFTHEBALANCEOFPAYMENTSSHOWSTHEMONETARYVALUEOFINTERNATIONALFLOWSASSOCIATEDWITHTRANSACTIONSINGOODS,SERVICES,ANDUNILATERALTRANSFERSTF15ANINCREASEINIMPORTRESTRICTIONSBYTHEUSGOVERNMENTTENDSTOPROMOTEAMERCHANDISETRADESURPLUSTF16SERVICESTRANSACTIONSONCANADASBALANCEOFPAYMENTSSTATEMENTWOULDINCLUDECANADIANSHIPSTRANSPORTINGLUMBERTOJAPAN,FOREIGNTOURISTSSPENDINGMONEYINCANADA,ANDCANADIANENGINEERSDESIGNINGBRIDGESINCHINATF17ONTHEBALANCEOFPAYMENTSSTATEMENT,DIVIDENDANDINTERESTINCOMEARECLASSIFIEDASCAPITALACCOUNTTRANSACTIONSTF18ASURPLUSONGERMANYSGOODSANDSERVICESBALANCEINDICATESTHATGERMANYHASSOLDMOREGOODSANDSERVICESTOFOREIGNERSTHANITHASBOUGHTFROMTHEMOVERAONEYEARPERIODTF19THEMERCHANDISETRADEACCOUNTONTHEBALANCEOFPAYMENTSSTATEMENTISDEFINEDTHESAMEWAYAS“NETEXPORTS”WHICHCONSTITUTESPARTOFTHENATIONSGROSSDOMESTICPRODUCTTF20APOSITIVEBALANCEONTHEGOODSANDSERVICESACCOUNTOFTHEBALANCEOFPAYMENTSINDICATESANEXCESSOFEXPORTSOVERIMPORTSWHICHMUSTBEADDEDTOTHENATIONSGROSSDOMESTICPRODUCTTF21FORTHEUNITEDSTATES,MERCHANDISETRADEHASGENERALLYCONSTITUTEDTHELARGESTPORTIONOFITSGOODSANDSERVICESACCOUNTTF22UNILATERALTRANSFERSREFERTOTWOSIDEDTRANSACTIONS,REFLECTINGTHEMOVEMENTOFGOODSANDSERVICESINONEDIRECTIONWITHCORRESPONDINGPAYMENTSINTHEOTHERDIRECTIONTF23UNILATERALTRANSFERSCONSISTOFPRIVATESECTORTRANSFERS,SUCHASCHURCHCONTRIBUTIONSTOALLEVIATESTARVATIONINAFRICA,ASWELLASGOVERNMENTALTRANSFERS,SUCHASFOREIGNAIDTF24CURRENTACCOUNTTRANSACTIONSINCLUDEDIRECTFOREIGNINVESTMENT,PURCHASESOFFOREIGNGOVERNMENTSECURITIES,ANDCOMMERCIALBANKLOANSMADEABROADTF25ONTHEUSBALANCEOFPAYMENTSSTATEMENT,ACAPITALINFLOWWOULDOCCURIFASWISSRESIDENTPURCHASESTHESECURITIESOFTHEUSGOVERNMENTTF26IFTOYOTAINCOFJAPANBUILDSANAUTOMOBILEASSEMBLYPLANTINTHEUNITEDSTATES,THEJAPANESECAPITALACCOUNTWOULDREGISTERANOUTFLOWTF27IFBANKOFAMERICARECEIVESREPAYMENTFORALOANITMADETOAMEXICANFIRM,THEUSCAPITALACCOUNTWOULDREGISTERANINFLOWTF28ONTHEBALANCEOFPAYMENTSSTATEMENT,ACAPITALINFLOWCANBELIKENEDTOTHEIMPORTOFGOODSANDSERVICESTF29THECAPITALACCOUNTOFTHEBALANCEOFPAYMENTSINCLUDESPRIVATESECTORTRANSACTIONSASWELLASOFFICIALSETTLEMENTSTRANSACTIONSOFTHEHOMECOUNTRYSCENTRALBANKTF30IFTHECURRENTACCOUNTOFTHEBALANCEOFPAYMENTSREGISTERSADEFICIT,THECAPITALACCOUNTREGISTERSASURPLUS,ANDVICEVERSATF31CONCERNINGTHEBALANCEOFPAYMENTS,ACURRENTACCOUNTSURPLUSMEANSANEXCESSOFEXPORTSOVERIMPORTSOFGOODS,SERVICES,INVESTMENTINCOME,ANDUNILATERALTRANSFERSTF32IFACOUNTRYREALIZESACURRENTACCOUNTDEFICITINITSBALANCEOFPAYMENTS,ITBECOMESANETSUPPLIEROFFUNDSTOTHERESTOFTHEWORLDTF33CONCERNINGTHEBALANCEOFPAYMENTS,ACURRENTACCOUNTDEFICITRESULTSINAWORSENINGOFACOUNTRYSNETFOREIGNINVESTMENTPOSITIONTF34INTHEBALANCEOFPAYMENTSSTATEMENT,STATISTICALDISCREPANCYISTREATEDASPARTOFTHEMERCHANDISETRADEACCOUNTBECAUSEMERCHANDISETRANSACTIONSAREGENERALLYTHEMOSTFREQUENTSOURCEOFERRORTF35BECAUSEALARGENUMBEROFINTERNATIONALTRANSACTIONSFAILTOGETRECORDED,STATISTICIANSINSERTARESIDUAL,KNOWNASSTATISTICALDISCREPANCY,TOENSURETHATTOTALDEBITSEQUALTOTALCREDITSTF36CONCERNINGTHEBALANCEOFPAYMENTS,THEGOODSANDSERVICESBALANCEISCOMMONLYREFERREDTOASTHE“TRADEBALANCE”BYTHENEWSMEDIATF37SINCETHE1970S,THEMERCHANDISETRADEACCOUNTOFTHEUSBALANCEOFPAYMENTSHASREGISTEREDDEFICITTF38ALTHOUGHTHEUNITEDSTATESHASREALIZEDMERCHANDISETRADEDEFICITSSINCETHEEARLY1970S,ITSGOODSANDSERVICESBALANCEHASALWAYSREGISTEREDSURPLUSTF39INTHEPASTTWODECADES,THEUSSERVICESBALANCEHASGENERALLYREGISTEREDSURPLUSTF40THEUSUNILATERALTRANSFERSBALANCEHASCONSISTENTLYREGISTEREDSURPLUSINTHEPASTTWODECADESTF41BECAUSETHEBALANCEOFPAYMENTSISARECORDOFTHEECONOMICTRANSACTIONSOFACOUNTRYOVERAPERIODOFTIME,ITISA“FLOW”CONCEPTTF42THEUNITEDSTATESWOULDBEA“NETCREDITOR”IFTHEVALUEOFUSASSETSABROADEXCEEDEDTHEVALUEOFFOREIGNASSETSINTHEUNITEDSTATESTF43IFACOUNTRYCONSISTENTLYREALIZESACURRENTACCOUNTSURPLUSINITSBALANCEOFPAYMENTS,ITLIKELYWILLBECOMEA“NETDEBTOR”INITSBALANCEOFINTERNATIONALINDEBTEDNESSTF44BYTHEMID1980S,THEUNITEDSTATESHADEVOLVEDFROMTHESTATUSOFANETCREDITORNATIONTOANETDEBTORNATIONINITSBALANCEOFINTERNATIONALINDEBTEDNESSTF45THENETDEBTORSTATUS,THATTHEUNITEDSTATESACHIEVEDINITSBALANCEOFINTERNATIONALINDEBTEDNESSBYTHEMID1980S,REFLECTEDTHECONTINUOUSCURRENTACCOUNTSURPLUSTHATTHEUNITEDSTATESATTAINEDINITSBALANCEOFPAYMENTSDURINGTHE1970STF46ALTHOUGHANETDEBTORCOUNTRYMAYINITIALLYBENEFITFROMANINFLOWOFSAVINGSFROMABROAD,OVERTHELONGRUNCONTINUEDBORROWINGRESULTSINGROWINGDIVIDENDPAYMENTSTOFOREIGNERSANDADRAINONTHEDEBTORCOUNTRYSECONOMICRESO