Balance Of Payments

Question 1

What is the balance of payments

Answer 1

A record of all the transactions between on economy and its trading partners

Question 2

The major part of the balance of payments is the current account. What is the current account?

Answer 2

This is defined as the sum of net trade in goods and net trade in services (exports minus imports), including net investment income and net international transfers

Question 3

What is investment income

Answer 3

• Investment income refers to the earnings generated abroad by domestic investors on the one hand
• And the earning generated domestically by foreign investors on the other

Question 4

If a country has a current account deficit, it spends _______ on imports than it receives in exports

Answer 4

More

Question 5

If a country has a current account surplus, it receives ________ from exports than it spends on imports

Answer 5

More

Question 6

A country’s natural _________ endowments could be a big factor in determining its current account position

Answer 6

Resource

Question 7

A reliance on a current account _________ could be a risky strategy for an economy if the market for a particular good or service experiences an unexpected shock

Answer 7

Surplus

Question 8

If two countries trade with each other, changing conditions on one country can affect the other’s ________ balance. A severe recession in one country means that it may want to import ________ goods from abroad - thus causing a ____________ in the importer country

Answer 8

Trade
Fewer
Slowdown