7.5 - Balance of Payment

Question 1

definition of ‘balance of payment’

Answer 1

A record of all economic transactions between one country and the rest of the world.

Question 2

What components are in the current account

Answer 2

1. Trade in goods
2. Trade in services
3. Investment income
4. Current transfers

Question 3

Define current account

Answer 3

The part of the Balance of Payment. It measures in the trade of goods and services, investment income and current transfers.

Question 4

Define current account surplus

Answer 4

When the value of exports is greater than the value of imports.

Question 5

Define current account deficit

Answer 5

When the value of import is greater than the value of exports

Question 6

Define current transfers

Answer 6

When money is transferred abroad without getting any goods/services back in exchange.

Question 7

Define Capital and Financial Account

Answer 7

Capital and Financial Account is part of the Balance of Payment, tracks investments in and out of the country.

Question 8

Factors affecting current account

Answer 8

1. Exchange rates
2. Relative inflation
3. Cost of production
4. Quality of good/service
5. National income

Main:
1. Exchange Rates

2. Relative inflation