Balance of Payments Flashcards
The Balance of Payments Account
This is a record of all financial dealings over a period of time between economic agents of one country and all other countries.
Balance of Payments can be split into two components
The Current Account - Where Payments for the purchase and sale of goods and services are recorded.
The Capital and Financial Accounts - Where flows of money associated with saving, investment, speculation and currency stabilisation are recorded.
The Current Account Components
Trade In Goods - Often called trade in visibles. This is trade in raw materials such as copper and oil, semi-manufactured goods such as car components and finished manufactures goods such as cars, tablets or mobile phones. Visible exports are goods which are exported.
Trade in Services - Often called trade in invisibles. A wide variety of services is traded internationally, including financial services such as banking and insurance, transport services such as shipping and air travel and tourism
Primary and Secondary Income - Primary Income results from loan of factors of production abroad. For the UK, most of this income is generated from interest, profits and dividends on assets owned from abroad. Secondary Income is a range of mainly government transfers to and from overseas organisation such as the EU.
Current Account Surplus
Current Account Deficit
Imports < Exports
Exports < Imports
