17 - the balance of payments Flashcards
current account
the part of the balance of payments that primarily records trade in goods and services
capital account and financial account
the part of the balance of payments that records capital flows in and out of the country
current account defecit
when imports of goods and services exceed exports
current account surplus
when exports of goods and services exceed imports
balance of trade in goods
visible exports minus visible imports
balance of trade in services
invisible exports minus invisible imports
net income flows
the difference between inward and outward flows of interest, profits and dividends
net current transfers
mainly government transfers to and from overseas organisations
hot money
volatile capitals movements which take place in the foreign exchange markets due to the interest rate changes
direct investment
the acquisition of productive assets, e.g factories and offices
portfolio investment
the acquisition of financial assets, e.g shares and financial derivatives
expenditure-reducing policies
policies used to correct current account imbalances by reducing consumer spending power
expenditure-switching policies
policies used to correct current account imbalances by encouraging consumers to buy domestically produced output rather than imports
marginal propensity to import
the proportion of an increase in income that is spent on imports
direct controls
controls on imports, such as tariffs and quotas
