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TABLE OF CONTENT Introduction 2 Economic implications dealing trade deficits 2 Policies to reduce a current account deficit 5 Conclusion 8 Bibliography 9 Balance of Payments The international trade in goods and services between countries has increased significantly over the past fifty years. Specialization by each nation has made every country to engage in international trade and hence to maintain balance of payments. The balance of payments is a comprehensive systematic record of a country's financial dealings with the rest of the world over a period of one year. This evaluates all payments among a country and its trading associates. The balance of payment account is divided into two sections, namely current and capital account. Thus the current account consisting the exports and imports of goods and services, net income flow, as well as transfer payments such as foreign aid grants. The current account balance is the accumulation of the balance of trade plus the interest, dividends, profits and transfers. On the other...

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