6.4 current acount of balance of payments

Question 1

balance of payments

Answer 1

A record of all money flowing into and out of a
country during a specific period.

Question 2

Current Account:

Answer 2

Section of the balance of payments that includes trade (of
goods and services), income, and unilateral transfers.

Question 3

Components of the Current Account

Answer 3

Balance of trade in goods (visible balance): records the debits and credits
from trade of goods on the current account.

Balance of trade in services (invisible balance): records the debits and
credits from services on the current account.

Primary income: records the debits and credits from income transfers:

Earnings from labor (wages, salaries).

Example: A Peruvian construction worker in Qatar earns wages, which
are recorded as:

an outflow in Qatar’s primary income

an inflow in Peru’s primary income

Investments (interest, dividends, profits from FDI)

Question 4

Trade deficit:

Answer 4

imports of goods and services are greater than exports of goods
and services

Question 5

trade surplus

Answer 5

exports of goods and services are greater than imports of
goods and services

Question 6

consequences of defcit account balance of payments

Answer 6

-increased borrowing , lower standards of living,deaprciating exchange rate , increasing unemployment,falling total demand

Question 7

consequences of surplus of acount balnce of payments

Answer 7

Increased investment abroad, higher standards of living,apreacitng exchange rates,decreasing unemployment,rising total demand,

Question 8

demand side polichy

Answer 8

Household savings incentive policy:,Currency devaluation:,Contractionary monetary policy:,Contractionary fiscal policy:,Trade barriers:

Question 9

supply-side policies

Answer 9

currrcny deavulation,trade policy,trade protecisionsm