Balance of Payments - Capital and Financial Account

Question 1

What is the balance of payments

Answer 1

A record of all financial transactions made between consumers, businesses and the govt in one country

Question 2

Name and explain the different parts of the capital and financial account

Answer 2

Foreign Direct investment (FDI):
-The flow of money to purchase a part of a foreign firm (10%or more of ordinary shares)

Portfolio investments:
-The flow of money to purchase a part of a foreign firm (less than 10% of ordinary shares)

Other investments:
-Loans, purchasing of currency and bank deposits