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What Are the Three Balance of Payments Accounts? Briefly Describe

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Essay

What are the three balance of payments accounts? Briefly describe them. What is the relationship among the three?


Definitions:

Direct Quote

A quote in foreign exchange markets that specifies the domestic currency price for one unit of a foreign currency.

Political Risk

The risk associated with changes in government policy which may negatively affect domestic and foreign businesses.

Disadvantage

This refers to an unfavorable condition or circumstance that reduces the chances of success or effectiveness.

Hedge

Investment made to reduce the risk of adverse price movements in an asset, often by taking an offsetting position in a related security.

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