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Balance of Payments and Trade Imbalances

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Please help with the following essay question. Provide at least 400 words in the solution.

Define balance of payments and trade imbalances and how these can impact both the domestic and foreign countries

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This solution defines the balance of payments and trade imbalances. I also explain how these can impact both the domestic and foreign countries. The explanation is given in 436 words.

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Problem: Define balance of payments and trade imbalances and how these can impact both the domestic and foreign countries

Solution:
The balance of payments is essentially a math equation, which looks like this:

Exports - Imports = balance of payments

When we export more than we import, we have a positive balance. When we end up importing more than we export, we have a negative balance of payments. When we look at the balance of payments, we analyze the differences between what we have imported and what we have exported in one year's time. When the balance is negative, we have more money being expended out of the ...

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