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Hello

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This is an operation that is the result of the difference between incomes and outcomes in the national economy, according to all the monetary transactions of a country with the rest of the world. According to this, there are two states for this BoP, and they are (Oswego. N.d.): Surplus: When a country’s BoP is positive. This means that incomes are higher than outcomes. Exportation and investment are higher than importations and expenditures. Deficit: When a country’s BoP is negative. Importations and expenditures are higher than exportations and investment. This also affects the debt that obviously is higher during a recession than in a surplus. · Tax payers: Income taxes will automatically decline during a deficit and will arise during a surplus. This means that when in a country there is a higher total income, people will be able to pay their taxes. Au contraire, when a recession people won’t have money to pay their taxes, so automatically the debt will increase (Oswego):. · Future Social Security and Medicare users: During a recession, the payments of social security, federal pension and interest on federal debt will be affected. It’s clear that, because when there’s no incoming money, neither there’s money to payments (Oswego). · Unemployed individuals: In a deficit, unemployment benefits, and other welfare like food stamps, will automatically arise. To explain this, you need to understand that when in a recession, companies will fire too many employees, this will increase the amount of unemployment people. As this occurs, government will pay more money to satisfy unemployment needs. Au contraire, when in a surplus, companies will hire more people, to satisfy consumer’s demand. With less unemployment people, the government will expend less money to satisfy their needs. · University of Phoenix student: As this is a for Profit University, when in a recession the student’s population will decrease, and in a surplus, student’s population will increase. The explanation for this success can be explained because when in a deficit, people’s income will decrease, and this won’t make possible to pay university’s fees. Otherwise, in a surplus, people’s income will increase, this will make possible to pay university’s fees. · The United State’s financial reputation on an international level: With a BoP (Investopedia. N.d.) negative outcome, the country will increase its debt. As debt arises, the country will become less trustable for financial corporations, because this will show a negative image of the country, this also will show less capacity to pay future financial commitments. Otherwise, in a surplus, debt will decrease. This is important for financial corporation, because they will see a positive current account balance (a current account with enough money to pay). This will arise financial confident in this country. · A domestic automotive manufacturing (exporter): As the Balance of trade (difference between imports and exports) is negative in a deficit, value of currency will decrease. According to exchange rate (Wikipedia, 2011) (amount of currency needed to pay a unit of another currency in different countries) the value of currency will decrease, so people in others countries will need to pay less money with the currency of this country. In this case, by example, when in normal market conditions, a person in France that pays €17,000 to purchase a new car, in a deficit this value will decrease, according to exchange rate. Otherwise, in a surplus, value of currency will increase, according to exchange rate, for a persona that pays $17,000 for a new car, will pay more money for the same car. · An Italian clothing company (importer): In the opposite way to exporters, importers are affected by currency exchange rate too. In a deficit, exchange value will decrease, and will be more difficult to import goods and services from another country, because they will be more expensive. Otherwise, in a surplus, exchange value will increase, and this will make possible to buy more goods and services with the same amount of money. By example, the Italian clothing importer that buys a dozen of shirts by $500, in a deficit won’t be able to buy the same amount, because exchange makes goods more expensive. But in a surplus, the same person will be able to buy more goods, because exchange rate will increase value of money in front of another’s country currency. · GDP: Stands for Gross Domestic Products. This is the total of incomes acquired by a country through by all the goods and services products in a given year (Investorwords. 2012). The GDP outcomes will affect the BoP, because with the highest GDP, BoP will be positive, and with the lesser GDP, BoP will be negative. With a negative BoP, debt will increase, affecting financial trust. References:
· Oswego. N.d. Chapter 12: Deficits, Surpluses, and Debt. Retrieved from http://www.oswego.edu/~edunne/200ch12.html
· Investopedia. N.d. What Is The Balance Of Payments? Retrieved from http://www.investopedia.com/articles/03/060403.asp#axzz22IxnJF90
· Wikipedia, 2011. Exchange Rate. Retrieved from http://en.wikipedia.org/wiki/Exchange_rate
· Investorwords. 2012. GDP. Retrieved from http://www.investorwords.com/2153/GDP.html

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