6.3 Current account of the balance of payments

Question 1

Define the term “Dividend payments”

Answer 1

A share of a firm’s profits paid to its shareholders.

Question 2

Define the term “Exchange rates”

Answer 2

Price of one currency in terms of another currency.

Question 3

Define the term “Balance of payments account”

Answer 3

A record of a country’s economic transactions with the rest of the world over a year.

Question 4

Define the term “Capital account”

Answer 4

Within the balance of payments, a record of the sale and purchase of copyrights, patents, trademarks, and money brought into the country by immigrants and taken out by emigrants.

Question 5

Define the term “Financial account”

Answer 5

Within the balance of payments, a record of the transfer of financial and capital assets between the country and the rest of the world.

Question 6

Define the term “Imbalance”

Answer 6

Debit items in the current account not equaling credit items

Question 7

Define the term “Current account deficit”

Answer 7

The value of the debit items on the current account exceeding the value of credit items.

Question 8

Define the term “Current account surplus”

Answer 8

The value of credit items on the current account exceeding the value of debit terms.

Question 9

Define the term “Balance”

Answer 9

Debt items on the current account equaling credit terms.

Question 10

What are the causes of a current account deficit?

Answer 10

1. A growing domestic economy
2. Declining economic activity
3. Structural problems