DEFINITION of 'Basic Balance'

An economic measure for the balance of payments that combines the current account and capital account balances. The basic balance represents an alternative approach to the surplus or deficit for the balance of payments under pegged exchange rate systems.

BREAKING DOWN 'Basic Balance'

Economists use the basic balance to help determine long-term trends in a country's balance of payments. The measure is less sensitive to short-run fluctuations in the interest or exchange rates, providing insight for the long term. The basic balance incorporates international investment fluctuations from the capital account, making it more responsive to long-term changes in a nation's productivity.

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    Discover how it might be possible to run a balance of payments deficit, what that means in terms of international trade and ... Read Answer >>
  3. What's the difference between the current account and the balance of payments?

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  4. What's does the current account have to do with the trade balance?

    Learn how a nation's trade balance is factored into its current account, and the differences between these two common terms. Read Answer >>
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