40) Balance of payments

Question 1

What is globalisation?

Answer 1

Globalisation refers to the increased integration of the world economy

Question 2

What is the balance of trade?

Answer 2

X - M
- If X is greater than M we have a surplus on the balance of trade

Question 3

What is the balance of payments?

Answer 3

Records all the real transactions between the UK and other countries on one side, and the net flow of money on the other. (MUST BALANCE)

Question 4

What is the current account?

Answer 4

(X - M) + net property income from abroad (e.g. profits from UK owned businesses located overseas)

Question 5

What causes the current account balance to change?

Answer 5

1) Change in the exchange rate
2) Productivity increase or decrease
3) AD increase or decrease in the UK or globally
4) Producing more or less g&s that are demanded worldwide
5) Political attitudes