2.5 - balance of payment

Question 1

BoP

Answer 1

Record of economic transactions between one country and RoW

Question 2

Inflow

Answer 2

Money flowing into a section of BoP
E.G exports rev

Question 3

Outflow

Answer 3

Money flowing out a section of BoP
E.G import rev

Question 4

3 sections of BoP

Answer 4

Current account
Capital account
Financial account

Question 5

Current account

Answer 5

Transactions of G+S between residents of a country + RoW

Question 6

Capital account

Answer 6

Transactions of physical capital between residents of a country + RoW

Question 7

Financial account

Answer 7

Transactions of financial assets between residents of a country + RoW

Question 8

Components of the CCAC of BoP

Answer 8

Trade in goods
Trade in services
Primary income
Secondary income

Question 9

Trade in goods

Answer 9

Balance of goods exported to balance of goods imported

Question 10

Trade in services

Answer 10

Balance of services exported to balance of services imported

Question 11

Primary income

Answer 11

Balance of incomes earned by residents abroad compared to incomes earnt in UK and sent abroad

Question 12

Secondary income

Answer 12

Transfers between governments
Includes FDI

Question 13

What does sustainable BoP position lead to?

Answer 13

Increased FDI
Long-term econ growth
Financial stability within a country

Question 14

Imbalance on the BoP

Answer 14

One section in surplus / deficit
Deficit is usually paid for by a surplus in another segment

Question 15

Causes of an imbalance in the trade in goods / services

Answer 15

Change in domestic income levels / incomes abroad
Changing investment in a country from abroad
Change in er

Question 16

Causes of an imbalance in the trade in primary / secondary income

Answer 16

Income earned by foreign in UK compared to UK earners abroad
Foreign aid abroad changes

Question 17

Consequences of an imbalance

Answer 17

Lower AD
Cost push inflation
Devaluation of currency
Decline in econ growth
Loss of FDI