Balance of payments Flashcards
1
Q
What is the balance of payments
A
A record of financial transactions between a country and the world
2
Q
What are the sections in the balance of payments
A
Current account, capital and financial accounts
3
Q
What is in the current account
A
- Trade in Goods
- Trade in Services
- Primary income
- Secondary income
4
Q
What is the difference between primary and secondary income
A
Primary income - investment income
Secondary income - transfer payments
5
Q
What is recorded in the capital account
A
aid transfers and non tangible financial assets (patents + trademarks)
6
Q
What is recorded in the financial account
A
FDI
investment flows of debt and equity
7
Q
What are some of the causes of a current account deficit
A
- Price and non-price competition
- Strong exchange rate
- Lack of essential industries
- High inflation
- Economic Boom
8
Q
What are some causes of a current account surplus
A
- Strong domestic industries
- Depreciated currency
- Low inflation
- Higher savings rate
9
Q
What can be done to deal with a Current account deficit
A
- Supply side measures
- Anti import measures
