Balance Of Payments

Question 1

Show how to calculate the balance of trade and recognise the weather such balances own equilibriums, surplus or deficit

Answer 1

Balance of trade = value of visible exports- value of visible imports.

Equilibrium- when inflows of currency are equal to outflows of currency
Surplus - when inflows of currency are more than outflows of currency
Deficit - when outflows of currency are more than inflows of currency

Question 2

Give reasons for a deficit on balance of trade or on current accountsof the balance of payments

Answer 2

BALANCE OF TRADE
- competitive disadvantages that, include higher production costs and lower quality products
- economic policies, such as monetary and fiscal policies that tend to boost domestic demand
-high, domestic consumption, which may give rise to an increase in imports
- Dependence on imports of essential goods, such as fossil fuel due to lack of natural resources
CURRENT ACCOUNTS
-net income from abroad is negative as higher payments because interest, profits and dividends are paid to foreign investors
-money, outflows of foreign aid sent abroad by residents

Question 3

Give reasons for a surplus on the balance of trade or on the current account

Answer 3

BALANCE OF TRADE
- competitive advantages, which occur when a country can provide a product at a lower average cost or a better quality
- Economic policies, such as monetary and fiscal policies that encouraged evening and investment can increase productivity, and hence become more competitive on the international market
- Increase in global demand may have the effect of increasing demand for exports from the country experiencing a surplus
- Depreciation of the currency will tend to make exports, cheaper and imports more expensive
CURRENT ACCOUNTS
- Net income from abroad
-Money received from people earning their income from working abroad