how can one use balance of payments in determining the movements in value of money?

Question

balance of payments determines the economics transaction of one country with rest of the world in one year...so how does that help in determing the movement in value of money

Answer 1

I'm going to try to answer this question using common sense. Ok........Trend wise, if the economy has a demand for a specific product(s) the value of money goes up, meaning more people are willing to earn/spend the money for that/those product(s). So using the balance of payments, one could say, "Well the people spent 20 Billion dollars last year on housewares, and 800 Million on Entertainment products, "so you would average the both and say, "We can probably count on 3/4 spending from the people in this particular area " depending also on other factors, like jobs, social trends, and the natural disaster factor.