Balance of payments Flashcards
define balance of payments
difference between value of imports and value of exports
list the current account
trade in goods
trade in services
net primary income
net secondary income flows
list the financial account
transaction in financial assets
investment flowers
govt transactions
whats in the capital account
transfer of assets by individuals
define balance of payments deficit
when value of exports is lower than the value of imports
list trade in goods
- consumer durables (household goods, motor vehicles)
- capital goods/ tech
- commodities
- components and basic raw materials
- foodstuff and beverages
define commodities
unfinished product that is then used in the production process
define components
finished products which is part of bigger product
list trade in services
- tourism and travel
- insurance and business consulting services
- baking and business accounting services
- data processing and other info services
- music and entertainment
- shipping
define import
a good/service that is produced overseas and brought into the UK the money leaves the UK
define export
a good/service that is produced in the UK and sold to someone overseas the money comes into the UK
define trade in goods
measures net exports of visible goods
what has the UK traditionally run on trade goods
a large deficit
reasons for a large deficit in trade of goods
- increase in demand for consumer goods
- decline in UK manufacturing sector
- lower production of primary materials
- strong currency (exports less favourable to foreign buyers)
define investment income (net primary income)
difference between income into 1 country and income out 1 country
what is in net primary income
land labour capital enterprise
define net current transfers (net secondary income)
money paid by UK govt to international organisations such as world bank/IMF
why is poor price and non price competitiveness cause of a current account deficit
- low investment in capital
- high inflation compared to trading partners
- poor branding, design, perfomance
why is strong exchange rate affecting imports and exports cause of a current account deficit
- high currency value increases prices of exports
- appreciating currency makes imports cheaper
why is recession in or more major trade partner countries cause of a current account deficit
- recession cuts value of exports to these countries
- barriers to switching to other markets
why is volatile global prices cause of a current account deficit
- exporters of primary commodities might be hit by a fall in world prices
- importing nations hit by prices for oil and gas
