24 Flashcards
The balance of payments (BOP)
Records all financial transactions made between consumers, businesses and the government in a country with another
Current Account
Measures inflow and outflow of goods, services, investment incomes & transfer payments
Current Account makeup
- Trade balance in goods
- Trade balance in services
- Net primary income
- Net secondary income
Capital Account
Measures all transactions between entities in one country with the rest of the world
Capital account makeup
- Capital transfers of fixed assets
- Transfer of transferable contracts
- Debt forgiveness
Financial Account
Measures transactions that result in change of ownership of financial assets and liabilities
Financial Account makeup
Causes Of Current Account Deficit
-> Non-price competitiveness
-> Strong exchange rate
-> Recession in trade partner
-> Volatile global prices
Current account deficit
debt > credits
Current account surplus
credits > debts
Primary income
income from loaning FOP abroad
Secondary income
income transfers between countries which occur with no corresponding output