The Interrelationship Between the International Balance of Payments, Inflation and Interest Rates in the United States from 1981-1987

This paper will deal with the forces that determines the total volume of the trade of any economy with others. In chapter II, the International Balance of Payments are analyzed. Chapter III reviews how the purchasing power was declining and how it affected the balance of payments. Chapter IV discusses why inflation produced a financial disaster in the United States. This is done by the rise and fall of the interest rate and also by the oil prices that washed out any good news in the trading industry. Chapter V presents a case study which illustrates how to reduce foreign exchange risk. Finally, the conclusion of the research briefly summarizes how to improve the financial crisis