Balance of payment on current account

Question 1

Balance of payments

Answer 1

record of all transactions relating to international trade

Question 2

current account

Answer 2

parts of BOP where all exports and all imports are recorded

Question 3

Exports

Answer 3

goods and services sold overseas

Question 4

imports

Answer 4

goods and services bought from overseas

Question 5

Current account deficit

Answer 5

when value of imports are higher than exports

Question 6

current account surplus

Answer 6

when value of exports are higher than the value of imports

Question 7

current account balance

Answer 7

the difference between total exports and total imports

Question 8

visible trade

Answer 8

trade in physical goods

Question 9

invisible trade

Answer 9

trade in services

Question 10

primary income

Answer 10

money received from the loan of factors and production abroad

Question 11

visible balance

Answer 11

difference between visible exports and visible imports

Question 12

secondary income

Answer 12

Government transfers to and from overseas agencies

Question 13

government income

Answer 13

government transfers to and from overseas agencies

Question 14

exchange rate

Answer 14

the price of one currency in terms of another

Question 15

the relationship between the current account and exchange rate?

Answer 15

if a country exchange rate gets stronger (means that one unit of a currency can buy more units of another currency) imports will be cheaper and exports will be more expensive , this would affect the current account negatively as there will be more imports than imports, creating a deficit (SPICEE)

Question 16

Reasons for deficit or surplus

Answer 16

Quality of domestic good
quality of foreign good
price of domestic goods
price of foreign goods
exchange rate between countries

Question 17

quality of domestic good

Answer 17

if domestic good is good quality then the demand for exports will increase creating a surplus

Question 18

quality of foreign goods

Answer 18

if another country has better quality of goods then there will be more demand of imports than exports creating a deficit

Question 19

price of domestic goods

Answer 19

if price of domestic goods increase then it should lead to deficit as other countries won’t be able to afford such high prices, resulting to more imports than exports

Question 20

price of foreign good

Answer 20

if price of foreign goods are cheaper, it would lead to deficit as there will be high demand of imports than exports

Question 21

exchange rate between countries

Answer 21

fall in the value of currency should lead to surplus as the weaker currency makes exports cheaper and imports more expensive