Balance Of Payments Flashcards
What is the definition of balance of payments
A set of accounts showing the transactions conducted between residents of a country and the rest of the world
Factors of balance of payments (4)
- trade in goods
- Trade in goods
- The net flow of investment income from U.K. overseas asset
- Transfers of money between people and governments
How do you calculate the current account
Trade of goods - transfers of money between people and governments
Examples of trade in goods (5)
- Consumer durables
- Capital goods / technology / software
- Commodities
- Components and basic raw materials
- Foodstuffs and beverages
Examples of consumer durables (3)
- Household goods (audio visual equipment, furniture)
- Motor vehicles
- Personal computers, DVD recorder, cameras
Examples of commodities (3)
Oil, gas and other fuels
Examples of components and basic raw materials (5)
- Plastics
- Copper
- Tin
- Rubber
- Semi-conductors
What is a trade deficit
When imports > exports
what are the AD factors of why there would be a trade deficit in goods (3)
- sustained growth of AD = increase demand for raw materials from abroad
- growth of consumer spending = especially UK consumers who have a positive preference for imports = economy cannot satisfy AD from consumers = buy more imports to meet excess demand
- strong exchange rate = value of British pound is higher than other foreign currencies = imports quite cheap + exports expensive to world markets = faster growth of imports + slower growth of exports
what kind of causes are AD factors
cyclical causes - mainly short term
what kind of causes are AS factors
LRAS - structural causes - mainly long term
what are the AS factors of why there would be a trade deficit in goods (4) - ASK SIR ON ANSWERS
- low rate of capital investment = decrease in quantity and quality of capital goods = insufficient productive capacity from suppliers
- Inadequate non-price competitiveness? ASK SIR
- A research and development gap?
- ASK
what is a trade surplus
when exports > imports
why would there by a trade surplus in goods(4)
- low value of pound = the same amount of foreign currency would buy more UK exported goods = UK goods are more internationally competitive = encourage AD for UK exports
- world boom = increase in AD for UK exports
- recession in domestic economy = decrease in GDP = less money flowing around the economy = cannot afford as many imports = lower AD for imports
- improved quality, design, reliability and availability of UK goods
factors of trade in services (6)
- tourism + travel (inc civil aviation)
- insurance + business consultancy services
- banking + accountancy services
- data processing + other info services
- music + entertainment
- shipping
