Balance of payments

Question 1

BOP imbalances definition?

Answer 1

perisistent deficits or surpluses mainly on the current account

Question 2

Current account balance def?

Answer 2

measures the difference between money and credit going in and out of an economy

Question 3

Current account surplus def?

Answer 3

when net external trade and income is positive

Question 4

current account deficit def?

Answer 4

when net external trade and income is negative leading to a net outflow of demand from the circular flow

Question 5

What are the key causes of a current account deficit?

Answer 5

-recession abroad
-appreciation in exchange rate
-volatile global prices

Question 6

What could a current account surplus lead to (bad for economy)?

Answer 6

more protectionism

Question 7

What could a current account deficit lead to ?

Answer 7

-loss of AD, reduced living standards and increase unemployment
-increased inflation
-loss of investors
-loss of international competitiveness