Balance of payments Flashcards
Balance of payments meaning
A record of a country’s trade/transactions
Three sections to the balance of payments
The current account
The financial account
The capital account
When does a surplus occur
Sum of exports of goods, services, investment, income and transfer is greater than imports
When does a deficit occur
Sum of imports of goods, services, investment, income and transfer is greater than exports
Why does the UK have a trade deficit for goods
Increase in demand for imported goods
Strong currency
The UK has seen a shift away from primary and secondary sectors
Why does the UK have a trade surplus for services
The shift towards the tertiary sector
The specialisation has meant the UK has become more competitive and can offer better quality at lower costs
How does inflation affect the competitiveness of an economy
reduces the competitiveness of an economy
by raising prices and making exports less attractive
What is in the current account
trade of goods, services, income investment, current trades
Current trades example
Remittances, foreign aid (money transferred abroad without getting any goods or services back.
Net investment meaning
Gross investment - depreciation
What does net investment indicate
If the capital stock in a country is rising or falling
What does a positive net investment mean
All captial which has been degraded has been replaced and additional capital has been added
Indicates increase in the productive potential
