Balance of Payments and Current Account Flashcards
1
Q
What is the Balance of Payments account?
A
A record of all financial dealings over a period of time between economic agents of one country and all other countries
2
Q
What is the current account?
A
Where payments for the sales of goods and services are recorded
3
Q
What is the capital/financial account?
A
Where flows of only associated with saving, investment, speculation and currency stabilisation are recorded
4
Q
What are the components of the current account?
A
- Trade in Goods
- Trade in Services
- Primary and Secondary income
5
Q
What is Trade in Goods?
A
- Often called trade in visibles
- Visible exports are sold to foreigners
- Result in an inward flow of money
- Visible imports are bought by domestic yutes
- Visible imports are outflow of money
6
Q
What is Trade in Services?
A
- Trade in invisibles
- Intangible services
- e.g American paying for a London hotel for tourism
7
Q
What is Primary Income?
A
- Results from the loan of factors of production fro abroad
- Interests, profits, dividends and UK assets owned by foreigners
8
Q
What is Secondary income”
A
- A range of mainly government transfers to and rom organisations overseas
- e.g the European Union
9
Q
How do you work out the current balance?
A
- Difference between value of exports and total imports
10
Q
What causes a current account surplus?
A
- When exports are of greater value than imports
- Monies flowing into the country from trade in goods and services along with primary and secondary income are greater than monies flowing out of the country
11
Q
What causes a current account deficit?
A
- When imports are of greater value than exports
- Monies flowing out of the country from trade in goods and services as well as primary and secondary income are greater than monies flowing into the country
