Balance of Payment 2.1.4

Question 1

Balance of Payment

Answer 1

it is a record of all of the financial dealings over a period of time between economic agents of one country and all other countries. Imports are when the goods and services comes in and money goes out, Export’s are when goods and services go out and the the money comes in.

Question 2

Current Account

Answer 2

it records payments for transactions between countries in the present year such as
-trade in gods
-trade in services
-investment income
-transfers

Question 3

causes of Current Account Deficit

Answer 3

-When the currency is too strong relative to other countries. such as the pound buys the many euros, then people holding the euros will not want to buy the goods from the UK and the people in the UK will be keen to buy things from the euro area.
-high rates of inflation relative to other countries
- high wage costs relative to other countries
- high level of economic growth in a country, meaning people with higher incomes tend to buy ore imports from abroad

Question 4

causes of current account surplus

Answer 4

• the currency is too weak, such as the Chinese renminbi buys few US dollars, than people in china will find it difficult to buy tings from outside China
  -low rates of inflation relative to other countries
  -low wage cists relative to other countries
  -low level of growth in an economy, making it harder to buy imports from abroad and creating a strong incentive for the firms in the country to export

Question 5

what does High economic growth tend to do to the Current Account

Answer 5

the current account becomes deficit as there is an increased in imports due to increase in demand, and it during times of high unemployment.

Question 6

international trade

Answer 6

this is when countries start relying on each other for:

-income through exports as they play a part of the countries AD

-Resources and goods through imports as they are necessary for production and consumption of goods in all countries.

Question 7

benefits of international trade

Answer 7

• it makes the country cooperative with each other

Question 8

negatives of international trade

Answer 8

• it can cause trade blocs to become powerful which can leave some developing countries unable to trade fairly.