Balance Of Payments

Question 1

What is the balance of payments?

Answer 1

The balance of payments is a record of a country’s financial transactions ( A balance sheet)

Question 2

There are 4 parts to the BOP, what are they?

Answer 2

1. Current account
2. Capital account
3. Financial account
4. International investment account

Question 3

What is the Current account

Answer 3

The current account records the flow of goods and services in and out of a country.

Question 4

What is the income account

Answer 4

The component that records the income earned by domestic citizens abroad

Question 5

What are current transfers?

Answer 5

Current transfers are one-sided transaction transfers

Question 6

What is the Capital account?

Answer 6

The capital account measures the capital expenditures and overall income of a country. The capital account’s balance will inform economists whether the country is a net importer or net exporter of capital

Question 7

What is the financial account?

Answer 7

The financial account is a measurement of increases or decreases in the international ownership of assets.

Question 8

What are the 4 components of the Financial account?

Answer 8

1. Direct investments - FDI
2. Portfolio investments - Stocks
3. Financial derivatives - things like currencies or commodities
4. Reserve assets - anything owned by the central bank