2.1.4 Balance of payments Flashcards
what is the balance of payments?
a record of all financial transactions between consumers,businesses and the government of one country with another country (the main measure of a country’s external trade allowance)
what is the balance of payment made up of?
the current,capital and financial account
what’s the current account?
measures the difference between money/credits going into a country via exports to what’s going out via imports
what’s an inflow?
an inflow of foreign currency are counted as a positive entry (eg exported goods sold over seas)
what’s an outflow?
an outflow of currency is counted as a negative entry (eg imported goods)
what’s a deficit?
more money is leaving that entering the country
what’s a surplus?
more money is entering the country than leaving
causes of a deficit?
-poor prices and non-competitive prices
-strong exchange rates
-recession in one or more major partnering country’s
-volatile global prices
-booming domestic industry - more raw materials needed
what’s trade balance in goods?
counted as manufactured goods,raw materials and machinery etc (visible)
what’s trade balance in services?
banking,insurance,tourism etc (invisible)
what’s net primary income? (from overseas assets)
flows of profits,interests and dividends from investments in other countries
what’s net secondary income?
overseas aid/debt relief eg payments to European union
what is the capital account?
(not as important as other two)
- measures
-debt forgiveness
- transfer/sale of assets
what is the financial account?
measure of portfolio investments, the buying and selling of financial assets
what are the key features of global trade patterns?
- around a quarter of output produced globally is exported
- production chains are becoming more complicated (different stages in different countries)
- bi lateral trade is becoming more important
- much more trade between rich and poor countries
- China, the US, Germany, France and Japan account for just under 40% of all international trade
