The balance of payments of a nation represents a statement of all transactions made between a country and the rest of the world over a given period usually one year. It summarizes all transactions that a country's individuals, companies, and government bodies conduct with individuals, companies, and government bodies outside the country. The balance of payments also provides indicators about the integration of the economy in the global trading systems and the impact that such dependency could have on the economy of the country. Most transactions of the balance of payments consist of exports and imports. In addition, the capital account of the balance of payments includes the flows of capital as well as the settlement of financial transactions with the rest of the world. A country balance of payments and its net international investment position together constitute its international accounts.

Based on the above statements answer the following questions: 1. If you consider the balance of payments of Bahrain as a case study for Bahrain international transactions, can you show whether Bahrain experience deficits or surplus in the last 10 years. Use data of balance of trade (exports and imports) to support your answer. 2. Both fiscal and monetary policies influence exchange rates and the current account balance. Explain how monetary and fiscal policies are used to correct imbalances in the balance of payments, i.e. in case the country is experiencing deficit in its balance of payments, how monetary and fiscal policies restore equilibrium in the balance of payments? 3. In recent years, Bahrain has been borrowing abroad. According to the International Monetary Bahrain's official debt-to-GDP ratio is 123%. How do you explain the impact of such high debt-GDP ratio on the value of the Dinar, capital flows, interest rates, and economic growth? 4. If you are appointed as a minister of international trade in Bahrain: a. Would you encourage foreign direct investment? Why or why not? b. Would you encourage regional cooperation? How? c. Would you support imposing tariffs and quotas on imported goods to Bahrain? Why or why not?

d. What do you recommend that Bahrain should do to increase integration in the global economy?