Balance of Payments Flashcards
What is the balance of payments?
Record of all financial dealing between economic agents of one country and every other country over a certain period of time
What is the current account?
Balance of trade (imports & exports), income and TRANSFER OF MONEY
Where does money flow for any export?
Into the country
Where does money flow for any imports?
Out of the country
What are net transfers?
Americans giving money away to rest of the world (family or foreign aid…)
What is an income payment?
Foreigner owning a US company getting money from US economy - outflow of money
What is an income receipt?
US citizens getting money from their foreign ownership of companies
What is the capital account?
CHANGE IN ASSETS (privately owned or government owned)
What is a change in foreign asset in US?
Foreigner buying a privately owned US asset
What is a change in foreign reserves?
Foreigner buying something from US government (bond…)
What is a change in US assets abroad?
Buying a privately owned asset from a different country
What is a change in US reserves?
US buying assets from a foreign government
What is the current account (change in flows of money) split into?
Trade in goods
Trade in services
What is a visible item?
A “good”
What is an invisible item?
A “service” or primary/secondary income
What is the balance of trade?
Difference between value of VISIBLE imports and exports
What are examples of services?
Banking
Insurance
Transport services (shipping + planes)
Tourism
What is an example of an invisible imports for the UK?
A British person on holiday in Spain (money flows out the country) - service bought from another country y
What are export credits in services?
Invisible exports
What are debits?
Invisible imports flowing out
What can the current account balance be?
Surplus or deficit
What is a primary income?
Net flow of profits, interest and dividends from investments (ownership of companies in another country)
What is a secondary income?
Transfer of money without anything been asked in return - donating to foreign charity, government transfers (benefits) or remittances (worker giving money to family abroad)
