Balance of Payments Flashcards
What is the Balance of Payments?
A record of a country’s economic transactions with the rest of the world.
Two main parts of BoP?
Current Account and Financial/Capital Account.
What does the current account track?
Trade in goods/services, income flows, and transfers.
What are “goods” in the current account?
Physical stuff traded — “visible” exports/imports.
What are “services”?
Intangible trade — “invisible” like tourism, banking.
What is “net income”?
Interest, profits, and dividends from overseas.
What are “current transfers”?
Money moved by governments e.g., aid
What are the components of financial account?
FDI, portfolio investment, loans, and reserve assets.
What happens if current account = deficit?
There must be a surplus in the financial/capital account.
What is “net errors & omissions”?
The gap when accounts don’t match perfectly.
What are the components of capital account?
Small money flows like debt forgiveness or copyright payments.
