Payments deficits and surpluses. Although the balance of payments must always balance or sum

To zero, economists and political officials frequently speak of balance of payments deficits and surpluses.

In doing so they are referring to the “current and capital account balance” shown as item 13

In Table 9. If this is a negative item, a balance of payments deficit is being realized as was the case

For the United States. This means that the United States earned less foreign monies from all of its

Trade and financial transactions than it used.

If the current and capital account balance were positive, then the United States would be faced

With a balance of payments surplus.

A decrease in official reserves (shown by a positive official reserves item in Table 14.1) measures

a nation’s balance of payments deficit; an increase in official reserves (shown by a negative official

Reserves item) measures its balance of payments surplus.

Similarly, any nation’s official reserves are limited. Therefore, persistent or long-term payments

Deficits, which must be financed by drawing down those reserves, would ultimately cause reserves

To be depleted. In this case that nation would have to undertake specific policies to correct its

Balance of payments. These policies might entail painful macroeconomic adjustments, the use of