Balance Of Payments Flashcards
What are imports?
Imports represent an outflow of foreign currency from a country, as they involve the purchase of goods and services from abroad. In the BoP, they are recorded as a negative entry in the Current Account
What are exports?
Exports represent an inflow of foreign currency into a country. They are counted as a positive entry.
What is BOP?
Balance of Payments
What is balance of payments?
Records of all financial transactions made between consumers, businesses, and the government in one country with another.
What does the current account of BOP show?
The main measure of external trade performance.
What is the balance of trade in goods?
Visible trade balance, measuring trade in tangible exports and imports
What is the balance of trade in services?
Invisible trade balance, measuring trade in exports and imports (Banking, Tourism)
What are primary income flows?
Investment income flows into and out of a country. (Profit flows from UK firms abroad)
What are secondary income flows?
Transfers such as gifts, aids and membership of institutions
What is the current account surplus?
Exports more than imports
What is the current account deficit?
Imports more than exports
What’s the problem of a current account deficit
Higher Unemployment
Less economic activity and growth
Overreliance
Leakage of money
What’s the problem of a current account surplus?
A target from competing countries
Demand-Pull Inflation
Less Development
Less consumption
