Balance Of Payment And Current Account Flashcards
What are the balance of payment accounts
The balance of payment accounts record all the financial transactions between residents of a country and the rest of the world over a time period
What 3 accounts does the balance of payments have
Current account
Capital account
Financial account
What is the only account we need to know?
Current account
What is the balance of trade?
Visible exports - visible imports
What is the current account balance?
Difference between the value of total exports and total imports
What is the current account?
It records the flow of money between the UK and the rest of the world arising from trade in goods and services, income from owning overseas assets and overseas transfers
What 4 things does the current account include?
Exports
Imports
Net transfers from abroad
Net income from investment
What are trade in goods? (Visibles)
Known as visibles because you can physically see them
E.g raw materials or finished goods
What are trade in services? (Invisibles)
These are services traded in or out of the country known as invisibles
What are exports?
Goods and services sold to foreigners by UK firms
A positive in the current account as money is entering the economy
Examples of visible exports
Cars, mobile phones, unfinished goods
Example of an invisible export
A Japanese firm buying insurance from a london firm
What are imports?
Goods and services bought by UK residents and firms from foreigners
A negative in the current count as money is leaving the economy
Examples of visible imports
Cars, mobile phones, unfinished goods
Examples of an invisible import
A holiday to Spain is an invisible import as money leaves the country and goes to Spain
How do you measure the value of imports and exports
Price x quantity
What is a current account surplus?
When there are more inflows than outflows
Exports are greater than imports
What is current account deficit
When there are more outflows than inflows
More imports than exports
