Balance Of Payments

Question 1

Balance of payments

Answer 1

A record of payments between one country and the world. It tracks the money flowing in/out of the country.

Question 2

The two sections of the balance of payments

Answer 2

• Current account
• Capital & financial account

Question 3

What does the current account cover?

Answer 3

• Trade in goods
• Trade in services
• Investment income
• Current transfers

Question 4

Are imports an injection or withdrawal?

Answer 4

Withdrawal - there will be a negative effect on the current account

Question 5

Are exports an injection or withdrawal?

Answer 5

Injection - this will have a positive effect on the current account

Question 6

Investment income

Answer 6

Money made back from investment

Question 7

Is investment leaving the UK positive or negative on the current account?

Answer 7

Negative as it is a withdrawal

Question 8

Is investment income entering the UK positive on the current account positive or negative?

Answer 8

Positive as it is an injection (money is flowing in)

Question 9

Current transfers

Answer 9

Money made in a foreign country coming back to the original country - no goods or services exchanged

Question 10

Remittance

Answer 10

Money transferred back home from relatives abroad

Question 11

Current account deficit means

Answer 11

More money flowing out of a country than in

Question 12

Capital and finance account

Answer 12

The money that flows out of the country is reinvested by other countries.