Answer to Question 1
The balance of payments has three sections: the current account, the capital and financial account, and the official settlements account. The current account keeps track of transactions in goods and services as well as net interest and net transfers. It equals exports minus imports plus net interest plus net transfers. The capital and financial account keeps a record of investment. It equals foreign investment in the United States minus U.S. investment abroad. The official settlements account keeps track of changes in U.S. official reserves. The sum of the three balances must equal zero.
Answer to Question 2
Fiat money is objects that are money because the law declares them to be money. Today's money is fiat money. In past times, money used to be items, such as salt or gold, that had an intrinsic value, that is, a value of their own outside of their role as money.
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