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marco econs for kh > balance of payment > Flashcards

balance of payment Flashcards

1
Q
A
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2
Q

What does the balance of payments (BOP) summarize?

A

Economic transactions between residents and non-residents.

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3
Q

List the main components of the Balance of Payments.

A
  • Current Account
  • Capital and Financial Account
  • Net Errors and Omissions
  • Reserve Assets
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4
Q

What is included in the current account?

A
  • Goods and Services Account
  • Primary Income Account
  • Secondary Income Account
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5
Q

What indicates a current account deficit?

A

A negative current account balance.

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6
Q

What indicates a current account surplus?

A

A positive current account balance.

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7
Q

What is the formula for the current account balance?

A

Goods Balance + Services Balance + Primary Income Balance + Secondary Income Balance

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8
Q

What constitutes the capital account?

A

Acquisitions and disposals of non-produced, non-financial assets.

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9
Q

What does the financial account record?

A

Net acquisitions of financial assets and net incurrence of liabilities.

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10
Q

True or False: A positive capital and financial account balance indicates that a country is a net borrower.

A

False.

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11
Q

What does an overall positive balance in the BOP indicate?

A

BOP Surplus.

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12
Q

What does an overall negative balance in the BOP indicate?

A

BOP Deficit.

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13
Q

What are reserve assets?

A

External assets controlled by monetary authorities for financing payment imbalances.

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14
Q

List examples of reserve assets.

A
  • Special Drawing Rights
  • Reserves Position in the IMF
  • Foreign Exchange Assets
  • Gold
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15
Q

What does a BOP surplus reflect?

A

An economy receives more foreign currencies than it pays in external transactions.

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16
Q

What does a BOP deficit reflect?

A

An economy pays out its currencies for external transactions.

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17
Q

Fill in the blank: A _______ indicates a negative balance in the current account.

A

current account deficit

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18
Q

Fill in the blank: A _______ indicates a positive balance in the current account.

A

current account surplus

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19
Q

What are net errors and omissions in the BOP?

A

Items for statistical discrepancies such as mistakes and failures to record all items.

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20
Q

What is the significance of reserve assets being positive?

A

Indicates an increase in the country’s reserve assets.

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21
Q

What is the significance of reserve assets being negative?

A

Indicates a decrease in the country’s reserve assets.

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22
Q

What does BOP stand for?

A

Balance of Payments

It summarizes transactions between residents and non-residents during a period.

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23
Q

What are the components of the Balance of Payments?

A
  • Goods and services account
  • Primary income account
  • Secondary income account
  • Capital account
  • Financial account
24
Q

What does a positive reserve assets balance indicate?

A

An overall net inflow of funds into the economy.

25
Q

What does a negative reserve assets balance signify?

A

An overall net outflow of funds from the economy.

26
Q

What does ‘Net Errors and Omissions’ in the BOP account represent?

A

Adjustments for discrepancies in recorded transactions.

27
Q

True or False: A current account deficit indicates that a country is spending more on foreign trade than it is earning.

28
Q

List possible causes of a current account deficit.

A
  • Cheaper imported goods
  • Loss in export competitiveness
  • Economic difficulties in other countries
  • Low quality of domestic goods
  • Domestic producers unable to meet demand
29
Q

What are some methods to correct a current account deficit?

A
  • Decrease imports
  • Increase exports
  • Import restrictions/quotas/duties
  • Depreciate domestic currency
  • Adjust government spending
30
Q

What does it mean for a country to be a net lender?

A

It has an increase in assets and liabilities outside the country.

31
Q

Fill in the blank: Singapore’s current account surplus has generally exhibited an ______ trend.

32
Q

What was Singapore’s current account surplus for 2019?

A

$86 billion

33
Q

What contributed to the forecasted decline in Singapore’s current account balance in 2020?

A

The coronavirus pandemic

34
Q

What does the capital and financial account reflect?

A

Acquisition of foreign currency-denominated assets by residents.

35
Q

What is the significance of Singapore’s large foreign currency reserves?

A

It reflects the country’s fiscal discipline and financial stability.

36
Q

What is a BOP surplus?

A

An overall net inflow of funds into an economy.

37
Q

What is a BOP deficit?

A

Overall net outflow of funds from an economy.

38
Q

True or False: The BOP helps determine if a country has an overall deficit or surplus.

39
Q

What is included in the reserve assets of a country?

A
  • Foreign currencies
  • Gold
  • Special drawing rights
40
Q

What is the current account balance calculated from?

A

Credits minus debits in goods, services, primary income, and secondary income.

41
Q

What does a country need to do to address a current account deficit?

A

Implement policies to reduce imports or increase exports.

42
Q

Fill in the blank: Singapore has been exporting capital abroad, reflecting its status as a ______.

A

net lender

43
Q

What is the overall balance of payments?

A

It summarizes all transactions and indicates whether there is a surplus or deficit.

44
Q

What factors can lead to a rise in net outflows in a country’s capital and financial account?

A
  • Higher net outflows of portfolio investments
  • Increase in net inflows of direct investment
  • Decline in net outflows of financial derivatives
45
Q

What does the capital account comprise?

A

Acquisitions and disposals of non-financial assets.

46
Q

What is the main focus of Chapter 5?

A

Balance of Payments

47
Q

What was the expected trend for Singapore’s current account surplus in 2020?

A

To tumble due to Covid-19

48
Q

Which organization provided insights on Singapore’s current account surplus in March 2020?

A

Fitch Solutions

49
Q

Where can you find the Balance of Payments video from Investopedia?

A

https://www.youtube.com/watch?v=YlQgeyKV-QM

50
Q

What are the two main components of the Balance of Payments?

A
  • Current Account
  • Capital Account
51
Q

What is a key reason for the decline in Singapore’s current account surplus in 2020?

52
Q

Fill in the blank: The Balance of Payments includes the _______ account.

53
Q

True or False: The Capital Account is one of the components of the Balance of Payments.

54
Q

What is the purpose of accumulating foreign currency reserves?

55
Q

Where can you find the video on the Capital Account?

A

https://www.youtube.com/watch?v=AimYG1jYD0A

56
Q

Where can you find the video on accumulating foreign currency reserves?

A

https://www.youtube.com/watch?v=HiphWQfB6J0

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