Introduction to Finance

TA B L E 6 . 3
U.S. Balance of Payments or International Transactions in 2014 ($ Billions)
Amount
Current Account
Goods and services
Exports
$2,343.2
Imports
$2,851.5
Balance on goods and services (exports less imports)
–$508.3
Primary income, net
238.0
Secondary income (current transfers), net
–119.2
Balance on current account
–389.5
Capital Account
Capital transfer receipts and other credits
0.0
Capital transfer payments and other debits 
0.0
Balance on capital account (receipts less payments), net
–.0
Financial Account
U.S. acquisition of financial assets, net
792.1
U.S. incurrence of liabilities, net
977.4
Financial derivatives, net
–54.4
Balance on financial account (assets less liabilities plus derivatives)
–239.6
Balances
Net borrowing from current account plus capital account balances
–389.5
Net borrowing from financial account balances
–239.6
Statistical discrepancy (net financial balances less net current & capital 
balances)
149.9
Note: the statistical discrepancy is the difference between the total of the current account plus capital account 
balances relative to the financial account balances.
Source: http://www.bea.gov/iTable/.

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C H A PT E R 6 International Finance and Trade
Applying Finance To...
• Institutions and Markets 
Commercial banks play an important 
role in fi nancing international trade. Banks provide commercial letters 
of credit that guarantee acceptance and payment of drafts. Banker’s 
acceptances, which are promises of future payment issued by a fi rm 
and guaranteed by a bank, also are important fi nancial instruments 
that facilitate international trade. Banks throughout the world also are 
important participants in the electronic currency exchange markets. 
Traveler’s letters of credit and traveler’s checks are provided by fi nan-
cial institutions to help travelers purchase products and cover living 
expenses while in foreign countries. 
• Investments 
Individuals and businesses interested in investing in 
securities issued by foreign corporations may need to use the cur-
rency exchange markets to convert U.S. dollars into the currencies of 
the countries where those corporations are located. Individuals trav-
eling internationally also will need to convert their U.S. dollars into 
the local currencies through the aid of fi nancial institutions. Investors 
may also speculate on the relative future movements of currencies 
through the use of spot and forward markets.